Moody’s upgrades Barbados rating; outlook still stable

New York – The United States-based Moody’s Investors Service (Moody’s) Friday upgraded the Barbados government issuer ratings to B3 from Caa1 while maintaining the island’s stable outlook

It said the key drivers behind the rating decision were the pre- and post-pandemic fiscal consolidation that, coupled with a strong economic recovery, led to a declining debt burden; the implementation of durable structural reforms will support achieving higher fiscal primary surpluses; as well as reduced government liquidity risk, coupled with adequate foreign exchange buffer, support Barbados’ credit profile.

The US rating agency said Barbados’ local currency country ceiling has been moved up in line with the sovereign rating and is now set at Ba3, while the foreign currency country ceiling was raised to B2 from B3.

“The three-notch gap between the sovereign rating and the local currency ceiling reflects low government intervention in the economy, strong rule of law, consistent macroeconomic policies and low political risk. The two-notch gap between the foreign-currency ceiling and the local currency ceiling incorporates relatively high external vulnerability and capital controls on foreign exchange movement.”

Moody’s said that prior to the pandemic, Barbados made significant progress towards addressing the root causes that led to the sovereign default in 2018.

“However, the severe pandemic-related economic contraction slowed down further reductions in debt burden. Over the past two years, as economic activity recovered and fiscal consolidation efforts resumed, the debt burden fell last year and returned to its downward trajectory.”

Moody’s said in its assessment, the improvement in growth dynamics and fiscal performance, as well as the reduction in the debt burden, will be sustained over the coming years. (CMC)