Barbados’ credit rating on the local market has suffered another downgrade and while the foreign currency ranking retains its position, the island’s overall financial outlook is regarded as negative.
This further lowering of the financial status of Barbados in regards to borrowing stems from recent findings of international credit rating agency Standard and Poor’s after examining the island’s overall financial performance.
With this latest demotion, the island’s ability to repay loans on the local financial market is now graded at ‘CCC’, and on the international market remains at ‘CCC+’, and the rating agency has warned that treasured currency exchange rate of Bds$2 to US$1 is at risk.
S&P stated that it moved to this position because its examination of the government’s fiscal situation revealed “policy challenges include high general government debt, deficits, and debt servicing requirements: limited appetite for private-sector financing; and a low level of international reserves, raising the risk to sustainability of the peg to the US dollar.”
In explaining its reasons for this latest assessment, the New York-based S&P stated, “the outlook reflects a potential for a downgrade over the next 12 months should the government fail to advance measures to significantly lower its high fiscal deficit, strengthen its external liquidity, and reverse its low level of international reserves. These scenarios would likely lead to further pressure on availability of deficit financing — be it from official or private creditors — and pose challenges for the fixed exchange rate regime”.
The rating agency did however state, “if government succeeds in balancing its fiscal budget, improves its access to finance, stabilizes external vulnerabilities and bolsters international reserves the outlook can be revised.”
This recent financial rating downgrade takes to 20 the total number demotions of status in the financial market, which affects not only government’s ability to borrow and makes the interest rates on any loans very high, but it also makes investors cautious in dealing with companies based on the island.
This affect on companies caused Caribbean financial giant, Sagicor, to relocate its headquarters from Barbados to the Bahamas in 2015.
But Finance Minister Chris Sinckler, who has been in charge of the country’s finances for seven of the nine years of downgrades this government suffered, was close to dismissive of this recent lowering of the island’s financial status.
“Rating agencies do not determine economic policy. They may comment on it, they may have an opinion on it and they may issue that opinion based on what they perceive to be the threats or potential threats to people who have lent money or are about to lend money,” Sinckler stated.
Opposition Leader Mia Mottley said, “this has become so routine that Barbadians are becoming immune to the news, but unfortunately, overseas investors and businesses are not.”
She said that because the continuous downgrades have pushed Barbados to the bottom of the pile of countries this rating agency assesses.
“Standard and Poor’s rates 130 countries. After this last downgrade to CCC, Barbados lies in 128th position. We are on par with Venezuela. There are only two countries who are rated worse than us — Mozambique and Belize.”
Behind the political cut and thrust lies the stark reality that Barbados’ financial circumstances are dire.
This the chief economist at the Barbados-based financial technology company Bitt.com, Marla Dukharan, to advise inhabitants of the island, “this S&P report in its entirety, should be read by every responsible citizen of Barbados. It is as loud and clear a warning as I have ever seen for the authorities, and for the nation as a whole.”
©2017 Community News Group
By submitting this comment, you agree to the following terms:
You agree that you, and not CaribbeanLifeNews.com or its affiliates, are fully responsible for the content that you post. You agree not to post any abusive, obscene, vulgar, slanderous, hateful, threatening or sexually-oriented material or any material that may violate applicable law; doing so may lead to the removal of your post and to your being permanently banned from posting to the site. You grant to CaribbeanLifeNews.com the royalty-free, irrevocable, perpetual and fully sublicensable license to use, reproduce, modify, adapt, publish, translate, create derivative works from, distribute, perform and display such content in whole or in part world-wide and to incorporate it in other works in any form, media or technology now known or later developed.