Another Ratings Upgrade for Barbados, But Caution Given

BRIDGETOWN, Barbados, Tuesday January 15, 2018 – Another ratings agency has given Barbados’ local currency credit rating an upgrade.

Regional credit rating firm Caribbean Information and Credit Rating Services Limited (CariCRIS) yesterday said that it “has upgraded the Regional Scale Local Currency rating of the Government of Barbados from CariD (Default) to CariBB, with a stable outlook”.

It said the decision was driven by the closure of the exchange offer for domestic (Barbados dollar-denominated) debt.

“This marks the successful completion of the restructuring of BDS$11.9 billion (equivalent to US$5.95 billion) in Barbados dollar-denominated claims on the Government of Barbados and its public sector,” the Trinidad and Tobago-based rating agency said.

The restructuring is a central plank of government’s comprehensive debt restructuring programme and the Barbados Economic Reform and Transformation (BERT) Plan, and is estimated to potentially save $500 million in interest per year.

The CariCRIS upgrade follows on the heels of international rating agency Standard & Poor’s last November raising its long and short term local currency ratings for Barbados.

Despite the good news on the local currency rating, CariCRIS maintained the Regional Scale Foreign Currency rating of CariD (Default) on Barbados’ foreign currency denominated debt because “the level of creditworthiness of the GOB [Government of Barbados], adjudged in relation to other rated obligors in the Caribbean, is below average”.

“Our decision to maintain the rating of CariD on the foreign currency debt is based on [the Government of Barbados] selected default on its foreign currency debt payments. Upon successful completion of negotiations with foreign debt holders, we will similarly revise our ratings on the country’s foreign currency debt,” said CariCRIS.

Government should complete the external debt restructuring by the end of March.

Meantime, CariCRIS said it expects the Barbados economy to grow between zero and one per cent for 2018 and 2019 “based on a continued stable performance in the tourism sector, and some rebound of construction over the next two years”.

However, it added, “there are downside risks which could temper our growth expectation”.

“These include: the impact of the United Kingdom’s Brexit decision, which while still unknown, could potentially lead to a decline in UK visitors and/or a reduction in their expenditure; a continued delay in the construction of the 15-storey, 237-room luxury Hyatt hotel because of the threat of legal action by several entities; and a rapid decline in available options for further fiscal growth support to an already overtaxed economy,” it said.

Click here to receive news via email from Caribbean360. (View sample)