BRIDGETOWN, Barbados, Friday January 12, 2018 – Barbados’ economy has been hit with yet another downgrade, this time from regional credit rating agency Caribbean Information and Credit Rating Services Limited (CariCRIS).
CariCRIS has lowered the island’s foreign currency rating by one notch from CariBBB+ to CariBBB- and its local currency rating from CariBBB+ to CariBBB – the 23rd downgrade in the last 10 years.
Although noting that Barbados’ creditworthiness is adequate, CariCRIS said its decision to downgrade the island was driven by the sustained reduction in net international reserves which had fallen to the equivalent of 2.2 months of import cover as at September 2017, below the internationally recognized minimum of three months or 12 weeks import cover, with foreign currency commitments, including the Government’s amortized debt commitments, outstripping foreign currency inflows.
On the bright side, however, CariCRIS also revised the negative outlook on the ratings to stable.
That decision was based on its 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.
Prior to the regional credit rating agency’s downgrade, New York based Standard & Poor’s lowered the country’s credit rating from CCC- to CCC, warning that there was a higher risk associated with maintaining the currency peg to the US dollar.
This is the latest in a string of ratings downgrades announced since the ruling Democratic Labour Party came to power in 2008.
And according to the Barbados Today online newspaper, University of the West Indies lecturer and economist Jeremy Stephen believes government has done very little to correct the recurring problem.
He said that despite recent upticks in the global economy, Barbados has continued to fail miserably with respect to shoring up its foreign reserves.