Barbados has received yet another downgrade from Moody's Investors Service.
Last Friday, Moody's downgraded the government bond rating from Ba1 to Ba3, citing poor economic growth and rising fiscal deficits.
Moody's also pointed to the rising costs of funding and the increasing reliance on short-term funding, citing the country's continued anaemic economic performance, ongoing deterioration in the government's financial strength due to persistently large fiscal deficits and rising debt levels, the deterioration in the government's debt profile as a result of the significant increase in domestic short-term borrowings over the past two years, and the fall in foreign exchange reserves by more than 30 per cent during January-September to $505 million for its two-notch downgrade.
Moody's also said the country's credit outlook remained negative.
"The continued negative outlook on Barbados' rating primarily incorporates Moody's expectation that the government's debt metrics are likely to continue to deteriorate. Additional factors driving the negative outlook are the rating agency's expectation that Barbados' growth prospects will likely remain subdued, the recently announced fiscal consolidation plan is unlikely to reverse current trends in government debt indicators, the government is likely to face increasing financing costs, and pressure on the exchange rate peg will continue to increase," it said in a statement.
The ratings agency added that Barbados' rating would face further downward pressure in the event that the government is unable to achieve its fiscal consolidation targets, or if growth continues to underperform the government's expectations, and debt ratios continue to rise as a result.
"Moody's could downgrade the rating further if international reserves continue to decline and or the government continues to rely heavily on short-term debt and Central Bank financing," it said.
"While an upgrade is unlikely given the negative outlook, Moody's could stabilize the outlook if the fiscal consolidation plan leads to a stabilization of government debt ratios, the economy returns to growth, the government decreases its reliance on short-term debt and central bank financing, and international reserves rebound."
Moody's also adjusted Barbados's local-currency bond and deposit ceilings to Baa3, its long-term foreign-currency bond ceiling to Ba1, its short-term foreign-currency bond ceiling to Not-Prime, and its foreign-currency deposit ceiling to B1.
This is the third downgrade for Barbados in a month, following on the heels of Standard & Poor's on November 20 and the Caribbean Information and Credit Rating Services earlier this week.