International credit rating agency Moody’s has maintained the Cayman Islands Government’s Aa3 bond issuer rating, Aaa country ceiling rating, and a ‘stable’ economic outlook in a report issued on 24 June.
To support the Aa3 rating, Moody’s referenced the Cayman Islands’ low debt burden and substantial liquid reserves.
Minister for Finance & Economic Development Rolston Anglin said in a press release on Thursday, “The reaffirmation of our credit rating as well as the ongoing ‘stable’ economic outlook is testament not only to our Islands’ political stability, the overall strength of our economy, and the resilience shown in our post-pandemic economic recovery and growth, but also to the requirement to comply with the Public Management and Finance Act and the Framework for Fiscal Responsibility.”
He continued, “This rating for the Cayman Islands Government bolsters economic activity as it reinforces confidence in the jurisdiction, which then fosters more investment, increased economic activity and ultimately greater opportunities for Caymanians.”
A Moody’s committee was called to evaluate the rating of the Cayman Islands Government on 18 June and found that the islands’ economic fundamentals and economic strength have not materially changed since the last review in June 2023.
A press release from Moody’s said, “The economy benefits from high per capita income, strong institutions, and a well-regulated financial sector that continues to grow despite global regulatory shifts. Although the economy is small and concentrated in financial services and tourism, its resilience is supported by sound governance and fiscal discipline, providing a strong buffer against external shocks.”
The Cayman Islands’ rating is supported by a strong institutional framework. The government’s fiscal policy is embedded in the Public Management and Finance Act and the Framework for Fiscal Responsibility.
Under that framework, the government must keep debt servicing costs and net debt below 10% and 80% of government revenue, respectively. As a result, the Cayman Islands’ debt burden is well below that of similarly rated peers.
“The Aa3 sovereign rating remains in the top tier of Moody’s ratings system and is only three notches below the highest rating of Aaa. Bonds that are rated Aa are judged to be of high quality and are subject to very low credit risk,” Anglin said.
The Cayman Islands has a similar rating to jurisdictions such as Belgium, the United Kingdom, Hong Kong, Saudi Arabia, Ireland, France, Taiwan and the Isle of Man.
With nominal GDP of US$7.6 billion in 2024, Moody’s noted that the Cayman Islands is significantly smaller than most other Aa-rated sovereigns, which have a median nominal GDP of US$532 billion.
However, the rating agency said, “This small size is partially offset by very high income levels. At nearly $89,000 in 2024, Cayman’s GDP per capita is higher than the $75,000 median for Aa-rated sovereigns, indicating a greater capacity for the population to absorb economic or fiscal shocks.”
The Cayman Islands’ debt-to-GDP ratio is also a fraction of the median ratio for similarly rated countries, with Moody’s explaining, “At just 6.4% of GDP at the end of 2024, the Cayman Islands’ debt burden is far below the 41% of GDP average for other Aa-rated sovereigns.”
Much of the credit for the low debt ratio was attributed by the rating agency to the Framework for Fiscal Responsibility. The report states that it expects government’s debt will remain below 10% of GDP, in line with the framework.
The Moody’s report explains that the Cayman Islands’ rating could move upward or downward in future.
Upward movement could be gained through stronger economic growth and greater diversification, in addition to “a significant and sustained increase in fiscal buffers further strengthening the island’s shock absorption capacity”.
Conversely, downward pressure on the rating would emerge if the Islands’ debt burden increases, even if still low relative to peers, combined with the economy’s small size and limited diversification.
The report said, “Erosion of the Cayman Islands’ strong fiscal position, evidenced by sustained fiscal deficits, or institutional changes that weaken restrictions on debt accumulation could put downward pressure on the rating.”
Moody’s economic outlook for the Cayman Islands is considered to be stable, reflecting the rating agency’s expectations that the territory “will maintain its … macroeconomic stability despite its small and concentrated economy”.
“Moody’s noted that the economic outlook is based on the Government’s continued commitment to prudent financial management, which the rating agency considers to be the lynchpin of our Islands’ resilience against external shocks, including those related to global financial regulation and climate-related risks,” Anglin said.
He added that while the rating agency’s rationale for the reaffirmation of the islands’ Aa3 rating and stable economic outlook is good news and reason for optimism regarding continued economic growth and stability, the government must guard against complacency.
“This latest evaluation from Moody’s reflects confidence in our country’s economic, fiscal and institutional strengths,” he said.
“However, it also underscores our responsibility to ensure that these accomplishments are maintained as a solid foundation to build upon. We must remain committed to keeping our debt ratio low, maintaining compliance with the FFR, diversifying and growing our economy, protecting our financial services sector, and mitigating the potential risks posed by hurricanes, climate change and other weather-related disasters.”
Premier André Ebanks said that while the report was encouraging and a sign that Cayman remains on the right track, it “reminds us that we can take nothing for granted”.
“Currently, our government is keenly focused on fiscal prudence to reduce, as much as feasible, projected 2025 deficits while preparing a solid 26/27 budget package,” he said.
“Cayman must now maintain the strengths which earned us the Moody’s Aa3 rating.”
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