Fitch affirms Jamaica's rating at B+, outlook remains stable
CLARKE... Fitch's action in the middle ofthe worst economic crisis in our historyis strong evidence of the value andbenefit of good policy
Ignoring fiscal rules would have led to a downgrade, Clarke points out

Fitch Ratings yesterday affirmed Jamaica's long-term foreign currency issuer default rating at B+ with the outlook remaining stable, the Ministry of Finance revealed last evening.

The news came amidst a verbal joust between Finance Minister Dr Nigel Clarke and the Opposition over the latter's proposal for additional spending in the proposed 2021/22 budget.

Last week, Opposition spokesman on finance Julian Robinson had urged the Government to increase the budget by one per cent of the country's gross domestic product (GDP), or $21.5 billion, to stimulate quicker growth, given the blow to the economy delivered by COVID-19.

“The Jamaican economy will grow faster if there is greater spend,” Robinson had insisted in his presentation to the budget debate last Thursday.

However, Clarke has since countered that argument, and last night, in reacting to the Fitch development, told the Jamaica Observer that: “Ignoring Jamaica's fiscal rules, going back to the bad old days of borrowing to pay interest, as suggested by the Opposition, would have led to a downgrade...which would have increased interest costs in a crisis and snuff out precious fiscal space. Jamaica cannot afford this.”

The Fitch announcement came in a late evening release in which the ministry said Fitch's rating action reflected:

• A favourable business climate according to the World Bank Doing Business Survey;

• The expectation that Jamaica will be “one of the few Fitch-rated sovereigns to post a primary surplus for the fiscal year;

• A financing plan in which 70.0 per cent of the Government's funding requirements will be sourced locally; and

• A targeted fiscal surplus for FY2021/22 supported by the one-off dividend payment of J$33 billion (1.5 per cent of GDP) from the Bank of Jamaica.

The ministry said that Fitch expects the economy to grow by 4.5 per cent in 2021 and 5.2 per cent in 2022, underpinned by a smooth COVID-19 vaccine roll-out; the mitigation of a possible third wave of the novel coronavirus and the gradual return to normality in the tourism industry.

Additionally, Fitch projects debt-to-GDP to be 110.9 per cent at the end of FY2020/21, an uptick from the 94.8 per cent recorded at the end of FY2019/20. The agency also projects the ratio to return to a clear downward trajectory, noting that the uptick is attributable mainly to a contraction in GDP and exchange rate depreciation over the period.

The finance ministry release quoted Dr Clarke as saying that Fitch's action “in the middle of the worst economic crisis in our history is strong evidence of the value and benefit of good policy”.

He said that the stable outlook is supported by the ratings agency's expectation that the public debt level will return to a downward trajectory, underpinned by the Government's maintenance of a high primary surplus, the resilience of the country's external finances, and stronger economic policy institutions.

“We are pursuing good policy with clear priorities, which evidently continues to pay dividends for Jamaica,” the finance minister told the Observer.

“Policy matters, especially in response to a crisis and, with our commitment to continued execution of good policy, Jamaica will recover stronger,” the release quoted him further.

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