Curtis Dickinson welcomes S&P affirmation of debt rating
The finance minister today welcomed a “stamp of approval” from leading credit ratings agency Standard & Poor’s after it affirmed Bermuda’s sovereign debt ratings.
Curtis Dickinson said the decision by S&P reflected government’s handling of the Covid-19 pandemic and also noted that the agency expected Bermuda’s economic recovery to begin this year.
As reported by The Royal Gazette last month, the agency affirmed Bermuda's A+ long-term sovereign credit and senior unsecured debt ratings, as well as its A-1 short-term rating and its AA+ transfer and convertibility assessment with the outlook assessed as “stable”.
Maintaining a stable debt rating helps Bermuda to borrow money at competitive rates. A downgrade would force it to pay more interest on new debt or on rolling over borrowing when it comes due.
Addressing the House of Assembly this morning, Mr Dickinson said: “Given all of the challenges this Island has faced as a result of the COVID-19 pandemic, this Government is very pleased to have been given a 'stamp of approval’ by S&P, for the way we have handled our affairs during these trying times.
S&P said it affirmed the ratings because of “Bermuda’s strong institutional framework for governance, prosperous economy, favourable external profile, ample fiscal flexibility, moderate net general government debt burden and limited monetary flexibility”, Mr Dickinson added.
S&P also said it believed Bermuda “can and is willing to implement reforms to ensure the longterm sustainability of public finances”.
Mr Dickinson added: “In S&P’s report they acknowledged that the COVID-19 pandemic “derailed” our fiscal year 2020/21 performance, but also acknowledged that this was the case for many other countries. Moreover, S&P believe Bermuda’s economic recovery will begin in 2021.
“While the report was very positive and endorsed all of the hard work the Government has done to date, it is also important to note that we must continue to be vigilant and maintain our prudent approach to management of the country’s finances.
“Factors such as an unexpected weakness in our insurance/reinsurance sector, a resurgence in the coronavirus that substantially shuts the economy, a failure to improve government finances which leads to sustained deficits, or a fall in the pension assets to less than 25 per cent of Gross Domestic Product, could cause S&P to lower our rating in the next two years,” he said.
Mr Dickinson said Government had to maintain and enhance its fiscal discipline and continue with its commitment to implement its Economic Recovery Plan in order to maintain its rating.