NASSAU, BAHAMAS — 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.
In a statement, issued by the Office of the Prime Minister, Prime Minister Philip Davis said the shift 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. 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 statement continued, “We made a commitment to the Bahamian people to bring stability, restore credibility, and build a stronger, fairer economy. That meant making hard decisions and implementing real reform—not just patchwork solutions, but long-term fixes.” The OPM noted that Moody’s recognition of progress in shifting the outlook to positive was based on key achievements. “They’ve acknowledged that our fiscal plan is working: debt is falling, the economy is growing, and we’re on track to reduce our debt-to-GDP ratio to below 70 percent by 2028. They’ve taken note of our return to a budget surplus and structural reforms to strengthen revenue and control spending. This is welcome news. It tells the world that The Bahamas is regaining its financial footing and that the work we are doing is credible and impactful. A key part of that progress has been this administration’s decision to take on energy reform—doing the hard things that no previous administration was prepared to do. Today’s news is a step forward, not a finish line.”
The government acknowledged that challenges remain. “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.” It noted that alongside fiscal stabilization efforts, the administration is undertaking the largest energy reform in the nation’s history, including major investments in renewable energy, modernization of outdated infrastructure, and efforts to reduce the cost and unreliability of electricity. “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. This moment calls for balance. We must be disciplined in our finances, ambitious in our reforms, and compassionate in our leadership.”
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. Lower borrowing needs, due to reduced fiscal deficits, will also lower liquidity risk.
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.
Moody’s maintained The Bahamas’ local- and foreign-currency ceilings at Baa3 and Ba1, respectively. The four-notch gap between the sovereign rating and the local-currency ceiling reflects the country’s track record of stable macroeconomic management, though balanced against its concentrated economic structure. The one-notch gap between the local and foreign currency ceilings indicates low transfer and convertibility risk, supported by strong institutional frameworks, exchange rate stability, and limited external indebtedness despite historical capital controls.
Moodys noted that assuming no major external shocks, primary fiscal surpluses are expected to reduce the debt ratio to 76 percent by the end of fiscal 2025, and below 70 percent by 2028. Improved revenue and falling debt are expected to gradually enhance debt affordability, with the interest-to-revenue ratio forecast to decline to 19.4 percent in fiscal 2025, down from a peak of 22 percent in 2021. Despite this progress, The Bahamas’ fiscal position will remain weaker than similarly rated peers. Still, as the government’s financing needs decline, its liquidity risk will ease, providing greater flexibility to refinance maturing debt.
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.
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 development of the domestic bond market would support an improved credit profile. Conversely, the positive outlook indicates a downgrade is unlikely in the near term, but the outlook could return to stable if fiscal progress stalls or reverses. Setbacks could include weaker-than-expected revenues, higher spending, failure to implement tax reforms, or increased exposure to external shocks and costly external financing.
