Mr. Speaker, I rise this morning to inform this Honourable House on the positive results of the recent sovereign ratings review by Standard & Poor’s (S&P).
Mr. Speaker, on Monday, March 29th, 2021, S&P conducted its annual ratings review of the country of Bermuda. The purpose of the review was to assess the country’s creditworthiness and to determine the level of risk associated with lending to Bermuda.
Mr. Speaker, when evaluating the creditworthiness of a country, a credit rating agency is assessing a country’s ability and willingness to service its financial obligations to commercial creditors, on time and in full. Both quantitative and qualitative considerations form the basis for these forward-looking assessments. Areas evaluated to assign an appropriate credit rating include those related to the political environment, its economic status, the effectiveness of its policy making, the sustainability of its deficits and its debt burden.
Mr. Speaker, to make its determination for Bermuda, S&P met with the Minister of Finance and his team, the Department of Statistics, as well as a number of other persons and entities in the public and private sectors. Outside of government agencies, those interviewed included the Governor, the leader of the Opposition and representatives from the Bermuda Monetary Authority, the Association of Bermuda Insurers and Reinsurers, the Bermuda Tourism Authority, and the Bermuda Business Development Agency.
Mr. Speaker, after their evaluation of the information received through their discussions and research, S&P has affirmed Bermuda's A+ long-term sovereign credit and senior unsecured debt ratings, as well as its A-1 short-term rating and its AA+ transfer and convertibility assessment with the outlook assessed as “Stable.”
Mr. Speaker, in explaining the rationale for the affirmation, S&P stated that, ”The ratings reflect Bermuda’s strong institutional framework for governance, prosperous economy, favorable external profile, ample fiscal flexibility, moderate net general government debt burden and limited monetary flexibility.” The report went on to state. “We view Bermuda's policymaking as largely effective, predictable, and proactive; and its political institutions as stable. We believe the territory can and is willing to implement reforms to ensure the long- term sustainability of public finances.”
Mr. Speaker, given all of the challenges this Island has faced as a result of the COVID-19 pandemic, this Government is very pleased to have been given a “stamp of approval” by S&P, for the way we have handled our affairs during these trying times.
Mr. Speaker, in S&P’s report they acknowledged that the COVID-19 pandemic “derailed” our fiscal year 2020/21 performance, but also acknowledged that this was the case for many other countries. Moreover, S&P believe Bermuda’s economic recovery will begin in 2021.
Mr. Speaker, while the report was very positive and endorsed all of the hard work the Government has done to date, it is also important to note that we must continue to be vigilant and maintain our prudent approach to management of the country’s finances. Factors such as an unexpected weakness in our insurance/reinsurance sector, a resurgence in the coronavirus that substantially shuts the economy, a failure to improve government finances which leads to sustained deficits, or a fall in the pension assets to less than 25% of Gross Domestic Product, could cause S&P to lower our rating in the next two years.
Mr. Speaker, to ensure Bermuda maintains its credit rating, Government must therefore maintain and enhance its fiscal discipline and continue with its commitment to implement its Economic Recovery Plan (ERP).
Mr. Speaker, at this point I would like to reiterate my gratitude to the health, national security and COVID-19 frontline teams for the work that they have done in combatting this virus, along with those persons in the public (the majority of our residents), who have been observing the restrictions which have had to be imposed for the safety of all. This has helped the Government to limit the damage done to the economy and ensure our economy begins to recover in the near term. I would also like to thank all of the people who met with S&P and helped to ensure their confidence in Bermuda.
Mr. Speaker, in closing I would like to highlight that this Government pledges to continue to implement reforms to ensure the long-term sustainability of public finances and economic growth over the long term, and to build a more inclusive and stronger Bermuda. The successful implementation of these and other key measures will ensure that Bermuda prospers and that credit rating agencies continue to endorse the creditworthiness of Bermuda.
Thank you, Mr. Speaker.