Barbados ecomomic outlook upgraded
By George Alleyne
Barbados this month received
major upgrades from two credit
rating agencies with the larger,
Standard & Poor’s (S&P), promising
further improved rankings
in the new year should the country
continue its new prudent fiscal
management policies.
New York based leader in
financial services, S&P, last week
raised Barbados’ credit rating six
notches from to ‘‘B-/B’ from ‘SD/
SD’ (selective default)’.
In the week prior, the Trinidad
and Tobago headquartered rating
agency focused primarily on the
Caribbean, CariCRIS, removed
its CariD (Default) Regional
Scale Foreign Currency Rating
of the Government of Barbados
and assigned an upward rating of
a CariBB-, with a stable outlook.
News of these upgrades is
music to the ears of Barbadians.
But for people of an island that
produced the likes of Rihanna,
Gabby and Red Plastic Bag, the
music is strange.
Though very much welcomed,
the music was odd, weird, to the
islanders who had suffered the
pain and indignity of 22 successive
international credit rating
downgrades over 10 years ending
in 2018, by which time the country’s
financial status was firmly
nestled in the junk category.
So, for Barbadians to be greeted
with this December 2019 news
of upgrades by two rating agencies
of standing, is for them to be
hearing sounds long forgotten.
The first move in halting the
ratings rout of this island that
is otherwise known for prudential
management of its financial
affairs came in June 2018 when
less than a week in office a new
government led by Mia Mottley
halted all debt payments thereby
selecting a default on its international
loan servicing outlook.
The new government’s team
of keen financial advisors set
about renegotiating terms and
conditions on all the country’s
debt, first securing agreements
on the local obligations.
Then it moved to resettle
arrangements for payment of the
foreign liability, an activity that
ended last month with creditors
accepting different repayment
conditions which are more
favourable to Barbados.
By successfully shifting the
past and future repayment
Caribbean Life, D 24 ec. 27, 2019-Jan. 2, 2020
deadlines to dates of 2021 and
2029, and through introduction
of amortisation conditions —
spreading loan reimbursement
periods over a number of set
bi-annual dates instead of lump
sum settlements — the current
government gave itself financial
room to manoeuvre and gained
significant savings.
Additional savings were
obtained through agreement
with these international creditors
to shave interest rates, resulting
in what junior Finance Minister
Ryan Straughn said will amount
to millions saved.
CariCRIS stated that it
upgraded Barbados precisely
because of results from these
renegotiations.
“The Government of Barbados
has indicated that the closure
of the transaction allows it
to immediately reduce its outstanding
external debt principal
by 25 percent and accrued interest
by 35 percent, and to meet its
debt-to-GDP target of 60 per cent
by 2033/34.
“In total, the Government of
Barbados immediately benefits
from the cancellation of just
over US $200 million in debt and
would generate approximately
US$500 million in cash flow savings
over the next five years,”
CariCRIS stated.
S&P stated, “given this outcome
of re-negotiations, we
believe that this exchange will
be the final resolution of Barbados’
foreign currency default that
began in June 2018”.
Junior Minister of Finance, Ryan Straughn.
Photo by George Alleyne