Bahamas was downgraded to B1 from Ba3 on the back of a high degree of “government liquidity risk” with the nation constrained by funding options given elevated external borrowing costs. This could lead to difficulties in paying its external payments and dollar bonds over time. Moody’s expects Bahamas’ gross borrowing requirements at ~200% of GDP. Bahamas’ reserves have grown steadily over the last three years to $3.2bn as of end-June 2022, equivalent to 45 weeks of imports; however, they are expected to decline due to higher commodity prices leading to higher imports. Further, constrained access to international capital markets increases its needs to rely on reserves. However, the rating agency also sees the country’s fiscal deficit turning into a surplus by end of fiscal 2025. The government plans to rely more heavily on domestic financing, utilize more multilateral funding including guarantees and credit enhancements. Moody’s does expect the government to maintain broad access to funding to finance narrowing fiscal deficits and upcoming amortizations.
Bahamas Downgraded to B1 from Ba3
