Video: Finance Minister On Moody’s Downgrade

May 18, 2013

The downgrade by Moody’s wasn’t entirely unexpected and he does not believe it will hamper us in raising funds in investment markets going forward, Finance Minister Bob Richards said yesterday [May 17].

Minister Richards said, “I was a little disappointed in their prognostications in the outlook. I think we laid out our case pretty thoroughly about what we plan to do to turn the Bermuda economy around, and certainly that will not stop us from executing that plan.”

When asked about the comments made about the downgrade by Shadow Minister of Finance David Burt, Minister Richards said, “I am not paying much attention to the PLP’s comments about this issue. They are the ones who got us in this pickle, and we are the ones who have to get us out.”

“If they had answers I am sure they would have executed those answers before,” continued the Minister. “The fact is they don’t even understand the problem, much less have the answers.”

“I think that we have a good understanding of the problems, and we are going to proceed with doing what is necessary to turn this economy around without bankrupting the Government.”

Mr Burt had said the downgrade and negative outlook by Moodys should “serve as a wake up call to the OBA”, and the new negative outlook is a “likely result of the OBA’s lack of a credible plan of action to address Bermuda’s deficit.”

Minister Richards continued, “I just came back from a trip overseas talking to prospective investors in Bermuda. There is definitely a positive perception of Bermuda with the change of Government, no question about that.

“I don’t believe we are going to get any significant changes in our rating until we can provide a series of data points. One data point does not make a trend. A series of data points is what is going to make a trend. We have to be patient, and we have to get those series of positive data points. We haven’t done it yet, but we will.”

Moody’s downgraded Bermuda’s government bond rating to Aa3 from Aa2 and placed a negative outlook on the rating. In addition, the foreign currency bond ceiling was moved to Aa2 from Aaa and the foreign currency bank deposit ceiling was downgraded to Aa3 from Aa2. Furthermore, the local currency bond and deposit ceilings were moved down to Aa2 from Aaa and Aa1, respectively.

A statement issued by the ratings agency said, “The downgrade was prompted by the steep rise in government debt and the lack of an economic recovery from the downturn at the time of the crisis. Government debt has risen from 5.9% of GDP at the end of the 2007-08 fiscal year to an estimated 28.1% at the end of 2012-13.

“The newly elected government’s first budget, introduced in February, projects a large deficit that will raise this ratio further in the coming year to over 30%,” said Moody’s.

They also said the Aa3 rating “is supported by the island’s very high per capita income, its strong institutions, and its still moderate level of government debt in relation to similarly rated sovereigns.”

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Comments (16)

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  1. blankman says:

    Well said – the PLP got Bermuda into the current mess and it’s up to the OBA to get us out.

    • jay says:

      What leader points a finger and provides no solution? Bob, what have even accomplished? You keep saying your going to fix the economy yet you haven’t done NOTHING besides pull the PLP card.

  2. Argosy says:

    Ignoring Burt and his party is the best part of the OBA’s plan!

    If you engaged a lawyer who messed up your affairs for 14 years, would you turn to him for further advice?

  3. Whistling Frog says:

    “We have to provide a series of data points that show improvements,it’s simple. We haven’t provided does data points yet.”

    I don’t think its as simple as he’s saying…

    • Truth (Original) says:

      It’s not. He’s simplifying it for the majority.

  4. js says:

    the Minister says that he just came back from a trip overseas and talking to prospective investors and that their is a positive perspective of Bermuda with the change of government

    unfortunately overseas prospective investors don’t vote

    the unfortunate reality is that the OBA can’t do anything wrong and is the government by a thread and the PLP can’t do anything right and isn’t the government by a thread

    the next election will be very interesting

  5. Bermewjan says:

    …he’s clearly still trying to figure out what to do.

  6. DarkSideOfTheMoon says:

    Read this article carefully. Richards says in his own words that the OBA’s plan was not received well by Moody’s and he is disappointed in the prognosis. Then he goes on to blame the PLP. Obviously yes, the PLP was government when the fall began, but obviously Moody’s does not have faith in the government’s budget either.

    • Mad Dawg says:

      But when they were in power, the PLP told us “there is nothing inherently wrong with debt”, They didn’t even know we had a problem. They criticized the then opposition for bringing it up, saying it shouldn’t be “politicized”.
      Interesting how they seem to say different things now that they’re the opposition.

    • Paying Attention says:

      Remember that the OBA’s budget is actually the PLP’s budget as it’s been outlined for quite some time since the OBA couldn’t have possibly had a budget in place, not knowing if they were going to win the election in the first place. Think before you talk. Damn dreamer.

  7. Second says:

    In full agreement. Burt was still in diapers and missed out on a lot!

  8. Observer says:

    Well done Bob,

    You stated it clearly. Understanding the problem is the key to solution though I think a blind man could have seen the problem. But when you are breaking the piggy bank to buy votes it is bound to catch up with you sooner or later.

    Investor confidence is important. As Mayor Bloomberg put it, night and day.

  9. Jus' Askin' says:

    After being told their plans are not good enough, they are still going ahead with them;-)
    OBA will NOT be able to turn this shrinking economy around, with the amount of people working getting less. Retail Sales are still on the decline. Where are the 2000 jobs? Why are they wanting to cut government workers salaries, which will only decrease income for government. This will further decrease retail sales and loss of more jobs. It is a downward spiral.
    “Cost Cutting” their way out of debt, will not work. They do not know what to do, neither did PLP. PLP did not get us into this pickle, as the world went through a financial change. The truth is we had our time and our time is up.