What Moody’s said
Moody’s Investor Services based its rating of Barbados on four main criteria:
* Reinforcement of negative fiscal trends given the increasing size of the fiscal deficit which exceeded 11 per cent of GDP in 2013-2014 and the agency’s expectation of continued challenges to fiscal consolidation.
* Increasing government debt ratios projected at above 100 percent of GDP by 2014/2015, coupled with elevated short-term debt issuance and gross financing needs in excess of 30 per cent of GDP in 2014 and 2015.
* Expectations of a decline in international reserves this year, due to large current account deficits and weaker private sector inflows.
* The Central Bank’s financing of the fiscal deficit which will increase pressure on the country’s currency peg to the US dollar.
In adddition to downgrading the Barbados Government’s bond rating by three notches, Moody’s also adjusted Barbados’ local-currency bond and deposit ceilings to Ba3, its long-term foreign-currency bond ceiling to Ba3, and its long-term foreign-currency deposit ceiling to Caa1.