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BARBADOS HAS SUFFERED another credit rating downgrade, this time closer to home.
And it’s due to concern about the island’s falling foreign reserves, said Trinidad and Tobago-based Caribbean Information and Credit Rating Services Limited (CariCRIS).
Following similar action by its international counterparts Moody’s and Standard & Poor’s (S&P) last year, CariCRIS yesterday announced its decision to reduce its foreign currency and local currency ratings for Barbados.
“CariCRIS . . . has lowered the assigned regional scale ratings on the notional debt issue of US$300 million of the Government of Barbados by one notch to CariBBB- (foreign currency rating) and CariBBB (local currency rating) from CariBBB (foreign currency rating) and CariBBB+ (local currency rating),” the organisation said.
It added that “these ratings indicate that the level of creditworthiness of this notional debt obligation, adjudged in relation to other obligations in the Caribbean, is adequate”.
Elaborating on the move, CariCRIS said: “Our decision to lower the ratings is driven by the sustained reduction in net international reserves which have fallen to the equivalent of 2.2 months of import cover as at September 2017, below the internationally recognised minimum of three months’ (12 weeks) import cover, with foreign currency commitments including the Government’s amortised debt commitments outstripping foreign currency inflows.”
It also said it had “revised the negative outlook on the ratings to stable”.
This decision was “based on our expectation for a number of tourism-related investment projects that are to be completed over the next two years, would likely boost economic activity and foreign exchange earnings.
“Completion of these projects, together with a number of recently-introduced fiscal measures aimed at fiscal consolidation and reduction of foreign exchange consumption, should serve to reverse the decline in reserves and rebuild the country’s external account position,” CariCRIS said.
Yesterday’s downgrade was the first for 2018. Moody’s downgraded Barbados’ credit rating in March last year, and S&P issued its most recent downgrade about four months ago.
These international rating agencies could take further action depending on what Central Bank Governor Cleviston Haynes says on January 31 when he reports on the economy’s 2017 performance and gives the bank’s 2018 outlook. (SC)