Barbados gets another downgrade
The announcement on Friday, that the Barbados Government will suspend foreign commercial debt payments as it seeks assistance from the International Monetary Fund (IMF), has resulted in a credit rating downgrade for the island.
The Caribbean Information and Credit Rating Services Limited (CariCRIS), placed Barbados on a "rating watch", as it listed the island's level of creditworthiness as "poor".
This means that the country's foreign currency rating now stands at "CariC", which is the same rating for its local currency: CariC.
Stating that "these ratings indicate that the level of creditworthiness of this notional debt obligation, adjudged in relation to other obligations in the Caribbean, is poor," CariCRIS explained the rationale behind the downgrade:
"This rating action is based on the June 1, 2018 Public Debt Restructuring Plan announced by the Government, following its in-depth review of the latest fiscal and external liquidity situation in Barbados."
Noting that the Government "quantified substantial arrears that were not previously included in headline public debt figures and which when added to the published figures pushed total public debt to GDP to over 175 per cent," CariCRIS spoke to other measures outlined:
"The Government also announced that gross international reserves stood at only US$220 million, equivalent to an import cover ratio of just seven weeks.
"Given these findings, the Government stated that it will be suspending payments due on debts owed to external commercial creditors. The Government also stated its intention to continue to meet all interest payments due on domestic debt, but that domestic creditors will be asked to roll over principal maturities until restructuring agreements are concluded."
Adding that it will "seek more information on the planned debt restructuring, and will further adjust our ratings if so required," CariCRIS stressed that it will closely monitor developments in Barbados while also noting that the Government:
"Is finalising a comprehensive economic reform programme which includes possible balance of payments support from the and which seeks to restore stability to the country’s finances and create conditions for the return of sustained economic growth in Barbados."
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