PORT OF SPAIN, Trinidad (CMC) — The Bankers Association of Trinidad and Tobago (BATT) says the decision by the US-based international ratings agency, Standards and Poors (S&P), to lower the Long Term Sovereign Credit Ratings for Trinidad and Tobago from A- to BBB+ makes the need for proposals for economic diversification and growth of “paramount importance.”

While the agency maintained the country’s economic outlook as stable, it said the change was based on Trinidad and Tobago’s higher debt burden.

It added that at the same time it was affirming its “A-2” short term sovereign credit ratings and lowering its transfer and convertibility assessment to ‘A’ from ‘AA-‘.

In a statement, the BATT said the discussions for proposals to debate economic diversification and growth  proposals between Government and private sector associations are also essential with Government soon to release its 2016/2017 mid-year review and as it prepares the 2017/2018 budget.

Government has said that the review will be presented sometime in the first half of May. 

In the statement, BATT said S&P highlighted the country’s rising debt and the associated interest burden over 2017 to 2020, which jointly constrain the government’s fiscal flexibility to adjust to adverse shocks. It said S&P has also noted that public finances are in a vulnerable state in light of a prolonged and substantial drop in energy revenues causing increased borrowing to fund budget deficits and worsening debt to gross domestic product (GDP) ratios.

“The New York-based international ratings agency (S&P) highlighted the country’s rising debt and the associated interest burden over 2017 to 2020, which jointly constrain the Government’s fiscal flexibility to adjust to adverse shocks.

“S&P has also noted that public finances are in a vulnerable state in light of a prolonged and substantial drop in energy revenues, causing increased borrowing to fund budget deficits and worsening debt-to-GDP ratios. As the Government will soon release its 2016/2017 mid-term budget review and indeed as it prepares the fiscal 2017/2018 national budget, their engagement with the private sector associations to discuss proposals for economic diversification and growth is of paramount importance, particularly in light of this S&P downgrade.”

BATT said ‘this is a critical time for our country and it is imperative that we collaborate to treat with the fiscal imbalances, while ensuring that appropriate policy measures are implemented to trigger a return to positive economic growth.”

In making the changes, S&P said the country’s debt burden increased sharply since 2014, amid the economic recession and while government introduced austerity measures to reduce fiscal imbalances, it expects budget consolidation to be slower than initially anticipated and interest costs to be higher.

In a report, the agency said that maintaining its stable outlook reflected its expectation that the local economy will recover modestly in 2017 – 2020 based on higher natural gas prices and production, supporting deficit reduction and the stabilisation of the debt burden.