As part of a recent report on **The Main Constraints on Caribbean Sovereigns**, Standard & Poor’s has rated The Bahamas, among other nations within CARICOM described as having *“small, narrow-based, and open economies prone to weather or other natural disasters.”* Just last month, S&P reaffirmed its A-/Stable and A-2 long and short-term sovereign credit ratings for The Bahamas.
This recent report also rated The Bahamas solidly in the investment grade category, and credited it as being “in a league by itself” compared to the others on per capita income.
Of particular note:
• Political stability, widespread consensus on major economic reform, established democratic institutions, and a strong judicial systems underpin The Bahamas’ track record of economic stability and prosperity, which is bolstered by generally prudent fiscal policy and a steady monetary stance
• A high income level in The Bahamas reflects its long track record of political and macroeconomic stability, bolstered by generally prudent fiscal policy and steady monetary stance.
• Growth rates for 2006 in The Bahamas will be higher than in 2005, rising by 3.0%
• Monetary policy in The Bahamas is dominated by its currency’s long-standing fixed parity with the U.S. dollar
• The government of The Bahamas should be a very small net external debtor in 2006 and is likely to become a small net creditor in 2007.
S&P concludes that the fiscal policies of The Bahamas by and large bolster its ratings, despite existing structural weaknesses. The report specifically notes that the credit standings and trajectories crucially depend upon economic policies adopted by the government. The small size, openness, and high dependence upon commodity prices and tourism are obvious constraints upon ratings. However, prudent and sensible policy direction – incorporating conservative fiscal and debt management, economic diversification, and liberalization efforts – should allow the nation to build cushions against unforeseen external shocks and to enhance its creditworthiness. S&P also points out that policy and data transparency, together with the strengthening of institutional frameworks, are also crucial in enabling smaller countries to maintain the confidence of international investors.