Finance Minister responds to Moody’s report
Finance Minister Bob Richards has responded to news ratings firm Moody’s has placed Bermuda's Aa2 government bond rating on review for possible downgrade.
Moody's Investors Service said that the review is prompted by “the steep rise in government debt since the global financial crisis and by the prospect of further rises in the coming two years.” A downgrade could result if the review concludes that the upward debt trajectory is likely to continue.
However, the report added: “Bermuda’s rating is supported by the island’s very high per capita income, its strong institutions, and its moderate level of government debt. At well over $80,000, per capita income is among the highest in the world. The country’s regulatory institutions have allowed the development of an important international business sector, especially insurance and reinsurance. Despite its recent rise, government debt started from a very low level and is still at a level only slightly higher than the median for countries in the same rating range.”
“The rating review will focus on the new government’s plans to address the upward debt trajectory and to implement reforms that would boost economic growth.”
The warning comes almost a week after a similar one from rating agency Standard and Poor’s (S&P).
Minister Richards said: “Although a possible downgrade is certainly not something we wish for Bermuda’s future, I was pleased to read in the report that Moody’s has recognised that the OBA is putting various initiatives in place aimed at economic improvement, as did the S&P report that was released last week. Government remains optimistic about future prospects for growth and will manage the economy accordingly.”
Shadow Finance Minister David Burt said: “The action today by Moodys Investors Service should serve as a wake up call to the OBA. Moody's said ‘The newly elected government's first budget, introduced in February, projects a large deficit that will raise this ratio further in the coming year to well over 30 percent’.
“The PLP, and now independent international observers, are shocked with the increase in spending and the record deficit contained in the first OBA Budget. This spending increase followed two consecutive years of spending reductions under the PLP. Though deficits are not new, the lack of any concrete action to reduce the deficit, by reducing spending and increasing revenues are alarming. We once again point the OBA to the ideas raised in our Party's Throne Speech Reply and Budget Reply; these ideas will assist Bermuda in diversifying the economy and increasing our revenue base.”
See tomorrow’s Royal Gazette for full story.
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