Ratings agency Fitch’s downgrade of Bermuda’s currency ratings is not a great surprise.Fitch traditionally has been the most bullish of the agencies towards Bermuda, so the fact it has now followed the others’ lead was mainly a matter of time.What is worrying is the agency’s language.The agency said Bermuda’s economy posted three straight years of GDP contractions and that Bermuda had “the weakest output performance among all ‘AA’ Fitch-rated sovereigns”. It is also negative on economic prospects, saying that it does not expect the economy to expand until 2014, by which time Bermuda’s economy would have been in recession or at zero growth for five years.The report is also critical of Government’s management of the economy, noting that the government deficit for the 2011/12 fiscal year could be 4.5 percent of GDP — twice what was originally estimated and above the ‘AA’ rating category.The report goes on to say: “Moreover, recurrent changes to the debt ceiling, withdrawals from the sinking fund to meet interest payments and the inability to implement a multiyear budget programme have undermined the credibility of the fiscal policy anchor and the commitment to fiscal consolidation.”These are damning words, although not new to local observers of Bermuda’s budgets. The lack of consistency in Government budgeting is catching up with Bermuda. The timing of this decision could not be worse as Government goes out seeking more revenue. It is worth noting that this round of borrowing is partly aimed at paying off the Government’s bank overdrafts, which are now at $120 million.Government also continues to maintain that the borrowing of recent years has been done to fund infrastructure spending. If that were true, there would at least be some reassurance. But it is not. This year, Government planned to spend $76 million on capital projects, but planned to borrow $172 million.In 2011-12, Government borrowed $180 million more than the $65 million it spent on capital projects. And the year before, it borrowed $62 million more than the $84 million it spent on capital projects. The balance has been spent on current account deficits and paying the interest on Bermuda’s debt. Fitch also noted that a “narrow and volatile revenue base” further limits Bermuda’s scope to maintain large fiscal deficits and debt burdens, Fitch says.Again, this is not a surprise. Critics of Government’s borrowing have been saying this for years, including Shadow Finance Minister ET (Bob) Richards. That’s why comparisons with larger and more diversified economies whose debt is much higher as a percentage of GDP are invalid.However, Bermuda’s bond prospectus, obtained by this newspaper and covered in depth in today’s edition, contains one very interesting table. It’s long been Government’s claim that the Island’s economic problems can be blamed on the global economic slowdown, and no one should pretend that it has had no effect.But it is interesting to note that no other country cited in the prospectus saw its Gross Domestic Product contract in both 2010 and 2011. And the report also shows that Bermuda’s debt, as a proportion of GDP, has soared since 2007, when it was just 3.3 percent of GDP. Now it is expected to be 21.4 percent, a stunning rise in just six years.It is no surprise that Fitch and others are now turning negative on Bermuda. What is surprising is that there are people in Bermuda who continue to maintain that the Island is on the right track.