Latibeaudiere knocks S&P rating
Published: Friday | August 14, 2009
The Bank of Jamaica, where monetary policy is composed and executed. - File
In language echoing that of other senior government officials, central bank governor Derick Latibeaudiere branded Standard & Poor's downgrade of Jamaica as premature and unwarranted, and suggested that the rating agency misinterpreted talks the government had with interests who floated a proposal for restructuring some of the country's $1.2 trillion debt.
But at briefing on Wednesday, Lati-beaudiere did not name the institutions involved, but insisted that there was no agreement on the matter and repeated, as Finance Minister Audley Shaw and Prime Minister Bruce Golding have done, that Jamaica remains committed to paying all its debts.
"The government had taken no decision on those proposals," Latibeaudiere told journalists.
"The government continues to maintain its resolve to honour all obligations, as contracted, and therefore, the rating action was unwarranted."
In its decision last week, S&P pushed down a notch, from B- to CCC+, its rating of Jamaica's long-term foreign and domestic debt, citing the unfavourable outlook for the country's economy and the possibility of a debt restructuring agreement that it would interpret as a "distressed transaction".
The S&P's action angered Jamaican officials who, pointing to the country's imminent agreement with the International Monetary Fund (IMF) for US$1.2 billion in credit, held that the rating agency acted precipitously.
While others have also held that no "distressed transaction" was in the making on Jamaica's debt, Latibeaudiere has so far gone the farthest with a public explanation or interpretation of the issue.
For while it is widely known that there have been behind-the-scenes talks on debt restructuring within the context of a social partnership agreement, no specifics on those discussions, focused, apparently on domestically-held debt, had previously reached the public domain.
According to the Bank of Jamaica governor, S&P's action "was based on their interpretation of a set of options that were presented to the government for consideration"
He added: "The options were presented to the government by a private institution and a specialist legal advisor was engaged to help in assessing the merit of these options. It was important to ensure that in coming to a decision there would be no breach of contract that would lead to the unhinging of public trust. It was also important to be minding of the binding nature of contractual obligations and the implications of establishing a precedent."
However, Latibeaudiere declined later to identify the institution with which the talks were held or how much money was involved or what legal advice was given. He referred questioners to the finance ministry.
The BOJ boss also hailed Jamaica's planned return to a borrowing relationship with the IMF as "a positive effort to assist in stabilising the external pressures and in addressing structural reforms in a sustainable way".
Additionally, he said, most of the country's economic indicators were pointing in the right direction - towards improvement in the medium-term.
"Inflation and inflationary expectations have been trending down and we expect them to remain subdued," he said. "The exchange rate has remained relatively stable and we expect this stability to continue. The current account of the balance of payments is projected to improve dramatically from a deficit of 21 per cent in FY 2008/09 to a deficit of 12 per cent in FY 2009/10."
S&P on August 5 had cited the country's deteriorating fiscal position for the downgrade.
The deficit deepened to $35.9 billion in June on unforeseen shortfalls in revenue, which were $7.7 billion lower than projected.