Minister of Finance Chris Sinckler tonight gave Barbadians the assurance that there was nothing about which they should panic, following the island’s external credit rating downgrade to junk bond status by international credit rating agency, Standard & Poor’s.
S&P has downgraded Barbados from BBB-/A-3 to BB+/B status. Sinckler told Barbados TODAY†the island had been subjected to two financial assessments over the past days by two leading rating agencies, namely Moody’s and Standard & Poor’s, which had examined the same figures and arrived at two different ratings.
“One held and the other downgraded. But it is just not true that we are in junk bond status,” he stressed.
Sinckler noted that Standard & Poor’s were looking at the “softness” of international economies and determining that it was unlikely their economies would turn around and therefore could not see how Barbados, as an open vulnerable economy, could change its own situation.
Sinckler noted that despite this, Standard & Poor’s had still acknowledged that Barbados had contained spending on wages and salaries, and had reduced its deficit from 9.3 per cent of GDP in financial year 2010-2011 to 4.6 per cent in the last year.
The minister of finance said that by the agency’s own assessment, it was apparent that the current situation had not developed with the past few years and that the major part of Barbados’ deficit problems was structural and more long-term, having been built up over more than a decade.
“When the previous administration had the opportunity to diversify and restructure this economy, they did not do so. We are now doing that over the medium to long-term,” he said.
He said the present administration was seeking to reduce the island’s dependency on foreign oil, reduce the high food import bill, and was strenuously ignoring the Opposition’s suggestions to cut the jobs of Government employees.
“They are calling for deep expenditure cuts, but cut them from where?” he asked.
Sinckler said despite the fact that Barbados was a small open economy there was no financial crisis; no crisis in the banking sector; and no high unemployment levels reaching figures of 20 per cent like some other countries.
He stressed that Barbados was stable and Government had been successful in maintaining that stability and keeping its people employed. He added the island’s social services were all functioning efficiently, adding it was sad that in the face of S&P’s downgrade, the only response from the Opposition was for expenditure cuts and the possible sending home of civil servants.
Sinckler said Government’s fiscal strategies were working and needed more time to work fully. He said Barbados was doing relatively well under the harsh external economic conditions that would of necessity impact on Barbados.
However, he reiterated that there was absolutely no reason for Barbados or potential investors to panic over S&P’s pronouncements.†(WG)†