The ratings agency Standard & Poor's downgraded the Bahamas' debt to 'junk' status. The agency cited weakened economic growth due to hurricanes and high debt levels. The downgrade makes borrowing more expensive for the Bahaman government.
"Caribbean islands are at the forefront of an escalating global debt crisis," said Eric LeCompte, Executive Director of the religious development coalition Jubilee USA. LeCompte works with religious leaders to solve debt crises on several Caribbean islands, including Grenada and Puerto Rico. "Frequent hurricanes, unpredictable tourism revenues, high poverty levels and unsustainable debt levels make up a recipe for financial crisis."
Although many Caribbean nations are at high risk of debt crisis, only Haiti is classified as "low-income" and thus eligible for traditional debt relief initiatives from international financial institutions. Grenada's debt is 94% of the size of its economy and its poverty rate is 37%. Grenada's religious leaders, Jubilee USA and regional partners won over $100 million in debt relief in 2015 restructuring agreements between Grenada's government and its creditors. The agreements additionally included a "hurricane clause" to delay debt payments in the event of a major storm. Consecutive hurricanes in 2004-2005 caused damage equal to twice the size of Grenada's economy. The Bahamas' public debt rose 30% in the past four years and its poverty rate rose by one third over the past fifteen years.
"The Bahamas is another Caribbean example for why we need processes to resolve financial crisis," noted LeCompte, who serves on UN expert groups on debt and finance. "The Bahamas is the latest small island to face these challenges, but it won't be the last."
Read Standard & Poor's press release announcing the downgrade
Read more about Grenada's debt restructuring
Read Eric LeCompte's testimony to Puerto Rico's Oversight Board that recommends Grenada hurricane clause use