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S&P moves Jamaica out of selective default

Published:Friday | February 26, 2010 | 12:00 AM

the successful completion of the Government of Jamaica debt-ex-change programme on Wednes-day, Standard & Poor's (S&P) raised ratings on the island, moving it out of selective default.

The firm moved its long-term foreign- and local-currency sovereign credit rating on Jamaica to B- and the short-term foreign and local-currency sovereign credit rating to C.

In January, S&P had placed Jamaica in selective default on announcement of the $700-billion debt-exchange programme, JDX, that recalled 350 domestic bonds. The agency had then cut ratings on Jamaica's local currency debt to C, from CCC, to reflect a "selective default", but maintained the CCC rating on the foreign debt, which was not affected by the bond call.

In January as well, government bonds included in the debt-exchange proposal were also given a revised rating of D, while those securities that did not form part of the initiative remained at the current rating of CCC.

But on Wednesday, Minister of Finance Audley Shaw announced the closure of the debt-restructuring programme, with 99 per cent take-up of the new offer, triggering the ratings upgrade.

The exchange of nearly $700 billion of higher-cost domestic securities for longer-term instru-ments at substantially reduced interest rates will save the GOJ $40 billion in debt-servicing (interest) costs, or three per cent of GDP, on an annualised basis.

S&P also took note of funds received from the International Monetary Fund under a US$1.27-billion standby arrangement.

"Although the restructuring did not reduce the stock of the debt, it lengthened its maturity, improved the debt composition, and decreased debt interest payments," said S&P credit analyst Roberto Sifon Arevalo on Wednesday, adding that S&P expects Jamaica's fiscal performance to improve somewhat next fiscal year.

S&P expects government deficit to be nine per cent of GDP, down from 12 per cent in the fiscal year ending March 31.