BAHAMAS GOVERNMENT DEBT REACHES "DANGER" MARK

C O N F I D E N T I A L NASSAU 000358

SIPDIS

STATE FOR WHA/CAR

E.O. 12958: DECL: 06/09/2019
TAGS: ECON EFIN BF
SUBJECT: BAHAMAS GOVERNMENT DEBT REACHES "DANGER" MARK

Classified By: CDA Zuniga-Brown for reasons 1.4(b) and (d).


1. (U) The Central Bank of The Bahamas reported that by June
2010 the national debt will rise to 43.2 percent of GDP - a
threshold well above the generally accepted "danger" level
(40 percent). Agencies such as the International Monetary
Fund (IMF) and Standard and Poor's become concerned when this
threshold is crossed, leading some to speculate about a
credit rating downgrade for The Bahamas. Central Bank
representatives told media there is a very real possibility
that the national debt could reach 45 to 50 percent by the
end of 2010 due to borrowing for infrastructure and capital
works programs in Nassau. National debt accounted for 38.9
percent of the GDP in June 2009.


2. (C) Standard and Poor's Director of Sovereign Ratings
told Charge in a private meeting on June 3 that The Bahamas
will most likely receive a negative rating due to their
incapacity to weather the economic downturn and limited
oversight of financial institutions.

ZUNIGA-BROWN