Sat | Jan 20, 2018

Barbados printing money, CariCRIS lowers credit ratings

Published:Tuesday | January 10, 2017 | 2:57 PM
Freundel Stuart, prime minister of Barbados.

Caribbean Information and Credit Rating Services Limited (CariCRIS) has 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.

It said the action was taken based on publicly available information, as despite CariCRIS’ requests the government has not been able to accommodate it for its regular onsite annual surveillance meetings.

A negative outlook has also been assigned to the ratings.

CariCRIS said the ratings indicate that the level of creditworthiness of that obligation, adjudged in relation to other obligations in the Caribbean, is adequate.

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, CariCRIS said in a release.

The printing of money has created a challenge for maintaining the fixed exchange rate, and the delay in several tourism related foreign direct investment projects may temper economic growth, it said.

CariCRIS said fiscal consolidation has been a top priority for the government but 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,” the release said.

In addition, the rating agency said, “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.”

However, 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.