Wed | Dec 7, 2016

Barbados PM defends economic strategy

Published:Tuesday | December 23, 2014 | 12:00 AM
File Freundel Stuart, prime minister of Barbados

The Barbados government says it remains firmly committed to the strategy for growth and development on which it has embarked, insisting that "the strategy has already begun to show positive results".

Prime Minister Freundel Stuart, responding to the latest downgrade of the island's long-term sovereign rating by the United States-based rating agency Standard & Poor's, said that the strategy is one "based on Barbados' established competitive strengths in tourism, international business and finance, and food and beverages, and on the island's potential for green energy".

Stuart said: "It is a strategy led by investment and outstanding entrepreneurship by the private sector, supported by government incentives and world-class financial regulations and legal safeguards. The strategy is anchored on our fixed exchange rate to the US dollar, which is protected by an adequate cushion of foreign exchange reserves."

Standard & Poor's (S&P) downgraded the long-term sovereign rating of Barbados to 'B' from 'BB-', warning also of the potential for a further economic downgrade.

But while it affirmed the 'B' short-term sovereign credit ratings for Barbados, S&P lowered its transfer and convertibility assessment to 'B' from 'BB-'.

It said the potential for a further downgrade existed "if the government doesn't succeed in bringing down its wide fiscal deficit; if growth boosted by key investment projects fails to materialise; or if external pressures of persistent current account deficits mount".

"This scenario would likely lead to further deterioration in the availability of financing for large fiscal deficits," the agency said.

On the other hand, S&P said it could revise the outlook to stable if the government succeeded in reining in the deficit in line with its targets and maintaining access to financing, especially from private creditors.

"This, in turn, would help improve government debt and interest burdens," S&P said.

The announcement by the rating agency comes a few days after Economic Affairs Minister Chris Sinckler told Parliament that the island was on a growth path.

NOT LABOURED IN VAIN

"Today, I can say to the country that based on actual performance and projections for the immediate future, we have not laboured in vain. Barbados is on a growth path once again. Our foreign exchange reserves have stabilised; our fiscal deficit is on a downward trajectory; and economic growth is returning," Sinckler said then.

But S&P noted that "much of the fiscal savings have yet to be realised".

In his statement on Sunday, Stuart said the growth and adjustment strategy has already begun to show positive results.

"The falling trend in foreign reserves, which we were experiencing at this time a year ago, has been arrested, ever since February of this year. The private sector has been given a boost with the investment that is under way in the hotel sector, the success of the cultural and sporting festivals, and the take-off in the green energy sector," he said.

"Tourist arrivals have stabilised, and tourist spending is on the rise. There are encouraging prospects for the winter tourist season," Stuart added.

- CMC