Concerned that Government continues to finance Barbados’ high debt and deficit through the printing of money, the Caribbean Information and Credit Rating Services Limited (CariCRIS) today lowered by one notch its ratings on the debt issue of US$300 million of the government of Barbados to CariBBB and CariBBB+ on its foreign and local currency rating, from CariBBB+ and CariA- respectively.
In a release issued today the regional rating agency said the action was taken based on available public information, as the Freundel Stuart administration had failed to meet its requests for its regular onsite annual surveillance meetings.
A negative outlook has also been assigned to the ratings.
“The downward adjustment of Barbados’ ratings and the negative outlook assigned are driven by concerns over the continued high fiscal deficit and increasing debt burden, which is being financed by the printing of money, creating a challenge for maintaining the fixed exchange rate, and by the delay in several tourism related foreign direct investments (FDI) projects which may temper economic growth,” the regional ratings agency said.
It also pointed out that even though fiscal consolidation has been a top priority for the Government of Barbados, “not enough progress has been made thus far”.
“While the primary balance has been in surplus for the last two fiscal years and continues to be so in this fiscal year, the large debt and interest burdens have become intractable, pushing deficits and exacerbating the problem,” it explained.
“Additionally, the fixed exchange rate is under threat of revaluation due to the printing of money to finance the fiscal deficit while the continued delay in tourism-related FDIs such as the luxury Hyatt hotel may create a challenge for accelerating much needed growth,” it added.
Today’s announcement by CariCRIS comes as a further blow to Government, which has been accused of serious economic mismanagement by the Opposition in the wake 17 previous downgrades the country has suffered– mostly by the international credit ratings agencies Moody’s and Standard & Poor’s — since the ruling Democratic Labour Party (DLP) came to power in 2008.
It also comes against the backdrop of concerns that the country may need to re-enter into a formal programme with the International Monetary Fund, after having to do so back in 1991 under a previous DLP Government led by Erskine Sandiford (now Sir LLoyd). Nonetheless, the Stuart administration has so far been strongly resisting the urge to do so, even though rumour has been rife that such a move is on the cards.
However, CariCRIS acknowledged today that for the nine months to September 2016, Barbados’ economy continued on its growth path that had started in 2014, with a relatively solid year-over-year increase of 1.3 per cent.
Real gross domestic product (GDP) growth of 1.4 per cent is forecast for full-year 2016.
CariCRIS said it expects real GDP growth in the order of 1.7 per cent in 2017, based on continued strong performance in tourism, supported by an anticipated 11 per cent increase in airline capacity from the United States and Canada.