BRIDGETOWN, Barbados (CMC) — The Barbados Government has welcomed the latest ratings given to the island by the US-based rating agency Standard and Poor's (S&P) that kept the kept Barbados' long- and short-term sovereign credit ratings at a highly speculative grade.
But Prime Minister Mia Mottley, who earlier this month announced plans for Bridgetown to approach the International Monetary Fund (IMF) for a second External Fund Facility (EFF) loan, said the announcement by S&P is an indication that Barbados had done reasonably well in the present turbulent circumstances even as she warned that Barbadians still had a "very tight rope" to walk.
In its latest ratings, issued last Friday, the credit rating agency said it reaffirmed its 'B-/B' long- and short-term sovereign credit ratings on Barbados, and its 'B-' issue-level rating on Barbados' debt. In addition, S&P reaffirmed its 'B-' transfer and convertibility assessment, and issued a stable outlook.
In outlining its rationale for keeping the island's "B-/B" long-and short-term ratings with a stable outlook, S&P said it considered Barbados' debt repurchase and prepayment "opportunistic and akin to a liability management operation, given that we believe the Government could have fulfilled its financial commitments absent this transaction, and that it was conducted with the purpose of directing funds to conservation efforts for Barbados' marine environment and to promote a sustainable blue economy."
S&P said its stable outlook reflected the view that the island continued to make progress under the Barbados Economic Recovery Transformation (BERT) programme, having met benchmarks under the IMF's EFF arrangement.
"The 'B-' ratings reflect our view that despite external challenges, including the pandemic, a hurricane, volcanic ashfall, and global geopolitical tension, Barbados' progress under the domestic BERT programme, and its achievement of IMF EFF targets, will continue to facilitate access to financing from multilateral institutions. At the same time, we believe that high reserve levels will continue to provide external liquidity to support the country's balance of payment position," it explained.
"The ratings also incorporate our view of Barbados' stable and mature political system, despite past issues with sustainable public finances, as well as an economy that has struggled with low growth and is vulnerable to external shocks, given its high concentration in tourism. At the same time, Barbados has limited fiscal and monetary policy flexibility, in our view, given a high debt burden, fixed exchange rate, and weak monetary policy transmission mechanisms following the completion of its debt restructuring in 2018 and 2019," it added.
Mottley, speaking at the ground-breaking ceremony for US$50-million hotel at Christ Church on the island's south-west coast, said "it is ironic that as we meet today we meet with the shadow of Standard and Poor's agreeing to uphold our rating and to have a stable outlook on Barbados.
"This comes at the very time when there are about 46 countries globally that are on the precipice of a debt crisis. The world is in serious difficulty," she said.
"I would like Barbadians to appreciate that we can make it but we are going to walk a very tight, tightrope, and that means everyone is engaged and understanding that this is not business as usual, nor is the world the same as we came to know it," said Mottley.
Prime Minister Mottley said that Barbados had endured the novel coronavirus pandemic, a freak storm, volcanic ashfall, a hurricane and the impacts from the ongoing war in Ukraine in recent times, but she remains "confident" the island has done "reasonably well".
"Does it mean we rest on laurels? Absolutely not. We have now the journey to build such that Barbados can become world-class by 2030. I am going to remain steadfast with that goal.
"We had hoped it would have been 2027 when we set it in January 2020, but you have plans and other plans are made for you. It is not those plans that throw us down that matter, it is how we get up and face the future, having been thrown down by those plans," Mottley told the ceremony.