(Barbados Nation) The Barbados Government’s decision to suspend debt payments to external commercial creditors has triggered a credit rating downgrade for Barbados by a regional agency.
Trinidad and Tobago-based Caribbean Information & Credit Rating Services Limited (CariCRIS) announced that effective yesterday it lowered the ratings on the US$300 million notional debt of Government to CariC- (Foreign Currency Rating) and CariC (Local Currency Rating) on its regional rating scale.
“These ratings indicate that the level of creditworthiness of this notional debt obligation, adjudged in relation to other obligations in the Caribbean, is poor,” CariCRIS said.
“This Rating Action is based on the June 1, 2018 Public Debt Restructuring Plan announced by the [Government], following its in-depth review of the latest fiscal and external liquidity situation in Barbados,” CariCRIS explained.
“The Government stated that this review identified and quantified substantial arrears that were not previously included in headline public debt figures and which when added to the published figures pushed total public debt to GDP to over 175 per cent.”
“The Government also announced that gross international reserves stood at only US$220 million, equivalent to an import cover ratio of just seven weeks. Given these findings, the Government stated that it will be suspending payments due on debts owed to external commercial creditors.
“The Government also stated its intention to continue to meet all interest payments due on domestic debt, but that domestic creditors will be asked to roll over principal maturities until restructuring agreements are concluded.”
CarisCRIS noted that Government “is finalising a comprehensive economic reform programme which includes possible balance of payments support from the [International Monetary Fund] and which seeks to restore stability to the country’s finances and create conditions for the return of sustained economic growth in Barbados”.
The agency said it would “continue to closely monitor developments in Barbados over the coming days, as we seek more information on the planned debt restructuring, and will further adjust our ratings if so required”.