NASSAU, BAHAMAS — Moody’s decision to revise The Bahamas’ sovereign credit rating outlook to “positive” from “stable” marks a significant milestone for the nation’s fiscal management and economic outlook, but debt remains a significant concern, according to Hubert Edwards, Principal of NextLevel Solutions, who emphasized the need for ongoing reforms.
Commenting on the decision, Edwards noted: “It’s a positive development for the country. It comes at an important time of global upheaval and great uncertainty and therefore augurs well for the ability to maintain some measure of stability should things get worse.” He added: “Overall, the picture painted is generally positive. It assumes that the plans presented, as outlined in the report, will be effectively implemented.”
However, Edwards emphasized that debt remains a significant concern for the country. “Debt is a big soft spot. While there appear to be some expectations and projections, the trajectory discussed is positive, but there is still an ongoing weakness in affordability. This is highlighted in contrast to similarly rated sovereigns. This is where lots of work is required despite the positive downward trending of debt to GDP,” Edwards said.
The implementation of a local bond market, he added, is crucial for rationalizing maturities and maintaining low costs. “It would appear that Moody’s is convinced that this process is well advanced. If that is the case, it bodes well as it will create a balance in managing rollover risk associated with the debt portfolio in general, but especially counterbalancing the more difficult foreign currency portions. Rationalizing maturities will be a fundamental step in easing the burden associated with managing the debt.”
Edwards believes the decision creates a solid foundation for deeper reforms aimed at reducing expenditure and improving efficiency. “One such area of focus should be in SOEs, as indicated by the PM’s continued efforts in reforming the energy sector. A careful read of the report and the PM’s comments thereon will lead to the conclusion that there are a number of areas where significant improvements in effecting reforms can be achieved.”
He continued, “The outlook is premised on the success of maintaining improved revenue intake and effective management of costs. Therefore, robust, disciplined, and strategic reforms in fiscal and economic management will be essential, especially in light of potential disruptive global headwinds.”
Moody’s has revised the outlook on the Government of The Bahamas’ credit rating to positive from stable, marking the first positive outlook in nearly two decades. The agency also affirmed the country’s long-term issuer and senior unsecured ratings at B1.
Prime Minister Philip Davis praised the change, stating that it signaled growing global confidence in the country’s economic direction. “For the first time in almost 20 years, an international credit ratings agency has given The Bahamas a positive outlook on our sovereign credit rating, signaling growing global confidence in the direction of our economy,” Davis said. “When we took office in September 2021, The Bahamas was facing some of the toughest economic conditions in living memory. Our debt burden was high, government finances were stretched thin, and the country was still reeling from the combined effects of a global pandemic, Hurricane Dorian, and years of mismanagement.”
The Prime Minister noted that the shift in outlook was a result of key achievements, including the reduction of debt, economic growth, and a return to a budget surplus. He further emphasized the ongoing commitment to fiscal reform, particularly in the energy sector. “No economy can thrive with high electricity bills and frequent blackouts. These reforms won’t happen overnight, but we are laying the foundation now for a cleaner, cheaper, and more resilient energy system for future generations,” Davis said.
Despite the positive outlook, the government acknowledged that challenges remain, particularly with the cost of living. “Bahamians are still under pressure. The cost of living is too high. Too many are still seeking reliable opportunities. Some communities are still waiting for the basic services they deserve,” the statement noted.
Moody’s explained that the positive outlook reflects the increased likelihood that ongoing fiscal consolidation will strengthen The Bahamas’ credit profile over time. The government has already implemented significant fiscal adjustments and remains committed to maintaining large primary surpluses through revenue-enhancing reforms. This is expected to reduce the debt-to-GDP ratio from 76 percent in 2024 to below 70 percent by 2028.
The affirmation of the B1 rating balances The Bahamas’ high government debt burden and weak debt affordability against its strong institutional framework, which includes a credible fiscal policy anchor and relatively high GDP per capita. However, the rating is constrained by the country’s vulnerability to external shocks—particularly climate-related events—and its dependence on tourism.
The B1 rating reflects the country’s high debt burden and limited fiscal space, but is supported by a stable political system, credible institutions, and high national income levels. The country’s small, undiversified economy and reliance on US tourism remain key vulnerabilities.
According to Moody’s, the positive outlook indicates that a rating upgrade is possible if the government sustains fiscal consolidation, achieves lasting debt reduction, and improves debt affordability. Efforts such as debt buybacks, refinancing with longer-term instruments, and the development of the domestic bond market would support an improved credit profile. While the outlook is positive, the report cautioned that setbacks such as weaker-than-expected revenues, higher spending, or exposure to external shocks could lead to a return to a stable outlook.
