Stephen welcomes S&P upgrade, urges caution

Barbados’ most recent upgrade by New York-based credit rating agency, Standard and Poor’s (S&P) Financial Services, is an achievement worthy of congratulations, economist Jeremy Stephen has declared.

But while it will go a long way in mending investor confidence, the ratings boost is no indication that citizens should expect an ease in the financial burden they have been asked to bear, he warned.

He told Barbados TODAY: “It is good that this notch has come about likely because of increased prudence when it comes to reviewing a government’s financial position.

“But again, even though the outlook is positive, one must always encourage the Barbados Government to continue putting the people first and making sure they keep their economic house in order.”

Barbados’ creditworthiness was lifted six notches, as S&P raised the long- and short-term ratings for ‘B-/B’ from ‘SD/SD’ while assigning its ‘B-‘ foreign currency issue rating to foreign currency debt delivered in the exchange.

The improvement comes after Government successfully exchanged over $1 billion in new 2029 bonds and $64 million in past due bonds to holders of its US dollar bonds following the administration’s 2018 default.

According to the economist, such achievements are the result of prudent economic management policies and a clear indication that government is capable of handling its debts.

“Fundamentally if a government can manage its debts, even with reduced payments or some period of moratorium agreed upon by investors, S&P and the others would consider it to be prudent financial management,” explained Stephen.

While noting the protracted period in which Government and external creditors remained at an impasse over the restructuring of external credit was “rather uncommon”, he was happy to see Government’s methods finally bearing fruit.

Stephen suggested that for the past six years a debt restructuring exercise was the only plausible solution to Barbados problems as global interest rates had become unsustainable.

He said: “Most institutions and persons would find themselves wanting if they continued paying debts at interest rates that were higher than what the markets expected them to pay or under more onerous terms than what the markets expected.”

To the Government, he declared “all still is not out of the woods” and implored leaders not to cease their efforts until the benefits of economic policies could be enjoyed by all.

Stephen said: ” You probably will not hear me say we are out of the woods for a while, but it is something to be congratulated and it does speak to our standing as a destination for investment.

“We just hope the economic feeling on the ground becomes the same and that Government continues to improve but not at the behest or to the disadvantage of the people.

“They both have to act coherently and concurrently.”

kareemsmith@barbadostoday.bb