We decided to share this article with readers of BAHAMAS CHRONICLE, which has a huge following among the Bahamian diaspora across the United States, Canada and the United Kingdom as well as in The Bahamas and the wider Caribbean. The Nassau Guardian published this article by Chester Robards on Friday, May 1, 2026.
Chester Robards
Senior Business Reporter
chester@nasguard.com
Credit rating agency Moody’s released a ratings report on The Bahamas yesterday revealing that it has upgraded The Bahamas’ credit rating to Ba3 from B1, and changed the country’s outlook to stable from positive.
Moody’s said the upgrade was a result of this country’s sustained strengthening in fiscal performance, that has placed government debt on a downward trajectory and materially reduced liquidity risk.
Moody’s said the government had a call with the rating committee on April 27 to discuss The Bahamas’ rating.
“The main points raised during the discussion were the issuer’s economic fundamentals, including its economic strength, have materially increased,” Moody’s said.
“The issuer’s institutions and governance strength have materially increased. The issuer’s fiscal or financial strength, including its debt profile, has materially increased.
“The issuer’s susceptibility to event risks has not materially changed. An analysis of this issuer, relative to its peers, indicates that a repositioning of its rating would be appropriate.”
The government released a statement late yesterday which highlighted the upgrade and parts of the report that laud the efforts of the government to improve the fiscal position of the country.
The rating agency said in the report that the government has established a credible track record of large primary surpluses, supported by stronger revenue collection, policy measures that broaden the tax base, and continued expenditure restraint.
Moody’s credited the country for robust primary surpluses that are around four percent of gross domestic product (GDP) throughout the next few years, which the rating agency said is among the strongest outcomes for similarly rated sovereigns. Moody’s said those promising numbers will support a decline in government debt to around 68 percent of gross domestic product (GDP) by the end of the fiscal year ending June 30, 2027,and just above 60 percent by the end of the decade.
Moody’s also explained that the backed foreign-currency senior unsecured rating was affirmed at Aaa, based solely on the unconditional and irrevocable guarantee of scheduled principal and interest payments provided by the Inter-American Development Bank.
It said the country’s stable outlook reflects a balanced credit profile at Ba3, adding that the country’s improving fiscal strength and lower liquidity risk has been weighed against the country’s still weak debt affordability, a narrow economic base centered on tourism, and significant exposure to climate-related shocks.
Moody’s further pointed to a sustained period of fiscal consolidation as a key driver behind the upgrade, noting that the country has shifted decisively away from the large deficits recorded during the pandemic years. The agency said stronger tourism activity, tighter tax enforcement and restrained government spending have all contributed to improved fiscal outcomes.
According to the credit rating agency, revenue performance has shown signs of becoming more durable, extending beyond cyclical tourism gains. The agency projected that government revenue will increase from approximately 21 percent of GDP in fiscal 2025 to around 22.5 percent in fiscal 2026–2027, supported by new policy measures and improved tax administration.
Moody’s said this strengthening revenue base, combined with controlled expenditure, underpins the country’s improving fiscal trajectory.
At the same time, the agency highlighted that improved fiscal balances are translating into better debt affordability metrics. Moody’s said interest payments are expected to fall to about 17 percent of revenue in fiscal 2027 from nearly 20 percent in fiscal 2025, reflecting both declining debt levels and more favorable financing conditions.
The report also underscored reforms in the energy sector, which are expected to reduce the financial burden posed by state-owned enterprises. Moody’s said these reforms will help limit contingent liabilities on the government’s balance sheet, further supporting debt sustainability over the medium term.
In addition to stronger fiscal performance, Moody’s emphasized improvements in the government’s financing strategy and overall funding profile. The agency said lower borrowing requirements and active liability management have reduced refinancing risks, with net financing needs now largely limited to rolling over existing debt rather than funding new deficits.
The credit rating agency laid out what factors that could lead to a further upgrade: “The rating could be upgraded if The Bahamas demonstrates a sustained improvement in debt affordability and a faster-than-expected decline in government debt, supported by large primary surpluses, broader, more resilient revenue generation, and further strengthening in the government’s financing profile.
“A material improvement in the sovereign’s access to financing on concessional terms, including greater use of multilateral financing or other sources that ease existing constraints on the funding profile, particularly in the context of elevated financing needs, would also support upward pressure on the rating.”
However, Moody’s cautioned that commercial debt still represents a significant portion of external obligations, which may limit how quickly borrowing costs decline. The agency also noted that while domestic refinancing needs remain elevated, they are manageable due to a stable investor base and improving credit fundamentals within the banking sector.
The report also outlined what could lead to a downgrade: “Downward pressure on the rating could emerge if slower progress on fiscal consolidation undermines the expected decline in government debt.
“Downward pressure could also arise from weaker tourism activity over a prolonged period of time, material fiscal slippage, or a severe climate-related event that significantly worsens fiscal or external metrics. A renewed increase in liquidity or rollover risks, or a materially weaker financing profile, would also weigh on the rating.”
Moody’s explained that economic growth is expected to moderate to 2.1 percent in 2026 following stronger expansion in 2025, as the economy returns closer to its potential.
While the current account deficit has narrowed, the agency noted it remains sizeable, and international reserves have held steady at approximately $2.8 billion.
Moodys also highlighted that The Bahamas continues to benefit from a stable political environment and consistent macroeconomic policymaking, factors that support investor confidence and underpin the country’s credit profile.
At the same time, the agency reiterated that structural vulnerabilities persist. Moody’s said the economy’s heavy reliance on tourism leaves it exposed to external demand shocks, while climate-related risks remain a significant concern given the country’s geographic location and susceptibility to severe weather events.
The agency noted that the government has taken steps to mitigate these risks through various instruments, including insurance coverage and contingent financing arrangements, though it emphasized that these measures provide only partial protection against major shocks.