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BARBADOS | Int'l lending agency Moody's downgrades B'dos

Featured International credit ratings agency Moody’s Investors Service International credit ratings agency Moody’s Investors Service
BRIDGETOWN, Barbados, Mar. 9, CMC – International credit ratings agency Moody’s Investors Service has downgraded the bond and issuer ratings of the Government of Barbados to Caa3.

In a release issued on Thursday, the New York based agency said despite the government’s efforts to contain the fiscal deficit and alleviate pressures on foreign exchange reserves, the fiscal deficit remains large and credit risks have increased in Barbados.

“The debt burden has risen in recent years and will continue to do so for the next few.”

According to Moody’s, domestic and external liquidity pressures on the sovereign have increased.

“We assess the likelihood of a credit event in the near-term as very high, given lack of fiscal adjustment and increasingly limited financing options.”

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Minister of Finance Chris Sinckler had said on Monday that the Barbados dollar was in absolutely no danger of being devalued.

The New York based agency also issued a negative outlook for the island, while warning that the sustainability of the Barbados dollar was now under threat, amid Government’s continued reliance on the Central Bank to finance its deficit.

However, unlike S&P, Moody’s has maintained a stable outlook for the island.

Moody’s noted that the upward pressure on the rating could build if the government initiates a credible fiscal consolidation programme to arrest the rise in debt-to-GDP ratio and put debt on a sustainable downward trajectory.

“These developments would likely be accompanied by reduced reliance on short-term debt and financing from the central bank, and a rebound in international reserves.”

The agency said the rating would most likely come under additional downward pressure if, following a restructuring, losses imposed on creditors exceeded 35 per cent .

This latest rating has come on the heels of a downgrade by Standard & Poor’s (S&P) and this week’s presentation of the Estimates of Revenue and Expenditure by Finance Minister Chris Sinckler.

Based on the 2017-2018 estates, the Government is proposing to spend BDS$ 4.5 billion for the coming fiscal year, with $1.8 million due to go towards debt serving.

  • Countries: Barbados