Vexed Bermoothes

Last night, the ratings agency Moody’s lowered Bermuda’s long-term foreign currency credit rating from Aa1 to Aa2, citing vulnerability to external shocks because of our country’s small size and lack of economic diversity.

Moody’s also cites Bermuda growing budget deficits and Government debt.  The impact of the rate drop is that it will cost more for Bermuda to borrow money.

Only in the PLP spin-cycle could this be translated into:

Moody’s Continues to Endorse Bermuda’s Institutional Strength

Sure, let’s be upbeat.  But let’s not kid ourselves.

Pat Gordon-Pamplin is quick on the draw to sum up the downgrade:

“It marks the end of Bermuda’s exceptionalism as a small, tightly managed financial jurisdiction that punched above its weight in terms of fiscal discipline and low government debt levels.  We have expressed concerns repeatedly about Finance Minister Cox’s management of the public purse, particularly her excessive borrowing that has seen our gross debt mushroom to a projected $680 million this year from $160 million in 2004, when she took over the post.”

“Ms Cox has also broken the long-held policy of holding debt to 10 per cent of gross domestic product – a hallmark of the island’s fiscal responsibility.  Moody’s registered its concerns this week, noting the tripling of government debt to GDP ratio since 2003 and the four-fold increase in external debt to current account receipts ratio over the same period.  For failing to maintain a strong grip on the island’s finances, Ms Cox becomes the first Finance Minister to preside over a downgrade in Bermuda’s credit rating.”