BRIDGETOWN, Barbados, , CMC – The Barbados government has welcomed the latest ratings by the US-based financial services company, Fitch Ratings, which assigned a long-term foreign currency issuer default rating (IDR) of ‘B’ with a stable outlook.

Fitch Thursday also assigned a short-term IDR of ‘B’, a country ceiling of ‘B’ and senior unsecured debt level of ‘B’.

In a statement, Minister in the Ministry of Finance and Economic Affairs, Ryan Straughn, said that the credit rating by Fitch demonstrates the confidence in the government’s macroeconomic programme but more importantly, it reflects the sacrifices made by ordinary Barbadians over the past few years.

“After years of continuous downgrades under the previous government, this rating action signals an upgrade, which is a step in the right direction, when compared to the current ratings by other agencies.

“We are not yet back to investment grade level but this will ease the cost of borrowing for entities operating in Barbados, particularly at a time of rising global interest rates.

“We believe that once we can stay the course and we can complete the reform efforts under the Barbados Economic Recovery and Transformation Programme 2022, then this government would be able to see the country through very tough times, and therefore, we ask Barbadians to stay the course,” Straughn added.

The New York-based financial services company said of its rating scale that the ‘B’ rating is highly speculative and indicates that default risk is present but a limited margin of safety remains. It also means that financial commitments are currently being met but capacity for continued payments is vulnerable to deterioration in the business and economic environment.

In its rationale, Fitch Ratings said Barbados’ latest ratings “balance high GDP per capita and governance scores, a strengthened external liquidity position, and a more favourable debt repayment profile following a comprehensive 2018-2019 restructuring, against its vulnerability to external shocks due to its heavy reliance on tourism, high public debt levels and limited appetite for domestic debt from local commercial banks”.

“The rating is supported by the recent International Monetary Fund (IMF) staff-level agreement to access the Resilience and Sustainability Trust (RST) with an accompanying Extended Fund Facility (EFF) programme which would underpin reform momentum and alleviate financing constraints, as well as Fitch’s expectation of a relatively quick reduction in the debt burden from high levels in the forecast period,” it explained.

Pointing to the 10.5 per cent economic growth during the first half of this year, the report noted that economic recovery has begun.

Fitch said it was forecasting real GDP growth of nine per cent this year and three per cent in 2023, although recessions in key source markets such as the United States and the United Kingdom pose downside risks.

The company said it expected the government to return to primary surpluses from this year, reflecting its commitment to bringing down debt, as it stated that the new IMF programme could help anchor achievements made to date and support the future.