Finance Minister hits back at Moody’s

Minister of Finance - Chris Sinckler

Minister of Finance Chris Sinckler has hit back at international agency Moody’s over its decision to lower Barbados’ credit rating earlier this week.

In a statement issued today, Minister Sinckler said the downgrade from BA3 to B3 shows that the agency has “clearly overreached in its highly negative conclusions, rushed to judgement, failed to adequately take into consideration the nuances of the Barbados economy”, and essentially undervalued Barbados’ commitment to make the necessary adjustments to protect its exchange rate and meet financial commitments.

Here’s what the minister had to say:

The change in credit opinion appears to have been heavily influenced by the fact that the actual deficit for 2013/2014 was 11 per cent compared to 8 per cent from the previous year. While, as Moody’s indicates, financing costs have increased, the expansion in the deficit was largely driven by a decline in the primary balance. As noted in the credit opinion, this was partly due to weaker than expected revenues for the 2013/2014 financial year. What is not reflected, is that there was a significant increase in reported expenditures due to the fact that, as it prepared to embark on a more aggressive fiscal adjustment programme, in finalising the financial statements for the 2013/2014 and locking in a short-term strategy for dealing with arrears owed to suppliers to Government, we took a decision to bring to book a number of outstanding payments. Some of these payments relate to prior year liabilities contracted by some State Owned Entities (SOEs).

This was a deliberate policy intervention by Government and would have increased the fiscal deficit by at least 2 per cent of GDP. It would, however, ensure that the Government’s financing requirements were properly accounted for and covered. It was consistent with the advice given by the International Monetary Fund (IMF) in the 2013 Article 4 Consultation Report. This will not be repeated in the fiscal year 2014/15, as this was a one-off exercise. As such, we are extremely confident that the fiscal targets outlined for 2014/2015 can be met with the fiscal programme outlined. The difference in deficit reduction between the Government’s and Moody’s forecast is 2 per cent of GDP, which can be explained by this adjustment. If the Moody’s baseline scenario reported in the credit opinion is adjusted to reflect the one-time items brought to book in 2013/2014, it will be equal to the revised Government forecast. The credit opinion also appears to have ignored the cuts in current spending and additional revenue raising measures, as well as the improvements in the external accounts. The Government is committed to the programme of fiscal consolidation, and is determined to be disciplined and stay the course.

The drastic change in credit opinion has been interpreted by some as evidence that the economic situation in Barbados has gotten worse over the last six months since the last Moody’s review. In the last six months, there have been a number of positive developments in the Barbados economy, which are difficult to reconcile with the notion that the economic situation in the country has gotten any worse. Barbados’ foreign exchange reserve position has stabilised significantly following major losses last year, even with the injection of the 150 million dollar external loan. Reserves now stand at around 15 weeks of imports, above accepted international minimum standards. There is simply no empirical evidence to suggest that the dramatic changes experienced in 2013 will be sustained through 2014 and into 2015.

The external debt services requirements are still below 10 per cent of foreign earnings, with a relatively flat and imminently manageable foreign debt service profile, and despite domestic financing pressures, available liquidity guards against presumed domestic credit events by Government. Barbados has not defaulted on any debt, local or external.

In the last six months, the Government has entered into an agreement with a foreign firm for the construction of a US$240 million Waste To Energy Plant (all private equity); Sandals Corporation is expending $130 million on expanding one of its properties in Barbados, while agreeing with Government to purchase a second property at the old Almond Hotel site and spend over US$250 million of its own money to rebuild a new 500 room hotel there. With this development, Government will now no longer have to take on debt to finance this operation. Additionally, Government has recently approved the sale of the former abandoned “Four Seasons Resort Project” to a major international investor and that will trigger another US$250 million in foreign direct investment. All of these projects, plus others, including a new cruise terminal at the Bridgetown Port, are expected to start within the next six months to a year.

Over the last six months, Barbados continued to make strides in restoring the viability of its traditional economic sectors and in growing new ones, from the exciting work in tourism specialty events such as Top Gear, Gospelfest and the upcoming CPL, to positive expansion in the Alternative Energy sector. These are all evidence of an economy building the platform for a positive recovery. Despite the ongoing economic challenges, we are hard pressed to find empirical evidence that economic conditions have gotten any worse in the last six months.

Over the last six months, the Government has forged ahead and even deepened its fiscal consolidation measures in an effort to rein in Government expenditure and boost its revenues. A recent review by an IMF staff team has confirmed this, indicating in their press release that the Government has implemented most of the announced budget measures.

Additionally, Government has forged ahead with the finalisation of the implementation of the Tax Administration Reform Programme with the establishment of the Barbados Revenue Authority (BRA); and a high-level independent Monitoring and Evaluation Committee to oversee strategic reforms to the fiscal and management operations of key State Owned Enterprises (SOEs), while upgrading the internal Management Accounting Unit to execute the recommendations of the MEC, in conjunction with CARTAC, IMF’s regional technical body. Government has also initiated a comprehensive review of the domestic tax system which is being carried out by experts from the IMF Fiscal Affairs Department.

So that contrary to the assertions by Moody’s in its press statement, it is clear for all to see that considerable progress is being made with programme implementation. However, even with the best of wills and the sincerest of wishes these measures need time to work. We are confident that if we stay the course Government’s fiscal deficit will definitely come down significantly; just as it is true to say that Central Bank financing of Government’s deficit will equally recede. Evidence of this reduction has already begun for the first quarter of this calendar year. We expect that as the fiscal programme takes full root, this trend will continue.

Finally, a number of experts, including some in the ratings agencies, seem to have decided that a devaluation of the Barbados dollar is required and to want to drive policy in this direction. The Government is committed to the fixed exchange regime and will do what needs to be done to protect the Barbados dollar. Neither the Government nor people of Barbados want a devaluation of the Barbados dollar, and as the Government, we are determined to do what is required to maintain the fixed exchange rate and honour our financial commitments. The Government is committed to the programme of fiscal consolidation, and we are seeing major signs of renewed economic growth in Barbados. As a Government and a people, we will stand shoulder to shoulder and overcome the challenges we currently face.

24 Responses to Finance Minister hits back at Moody’s

  1. Angel OfThunder
    Angel OfThunder June 7, 2014 at 3:05 pm

    Lol man firing at the people that or honest about the conditions of the economy,it shows me y’all so foolish if u was doin ur jobs then none this would have happy an the downgrade wouldnt be y’all play to much man..

  2. Angel OfThunder
    Angel OfThunder June 7, 2014 at 3:07 pm

    U attacking the wrong problems attack the fact that u or to blame for much of the problems because 5000 people send home nothing has change what so ever what a waste of time…

  3. Lorna Watson Deukett
    Lorna Watson Deukett June 7, 2014 at 3:11 pm

    Yes we will rise again 2 glory and victory, as soon as we get these losers who have systematically run our beautiful Island into the ground with their borrow and spend and tomorrow will take care of itself attitude out of power. U have been liars from day one and any right thinking person should have never put u spendthrifts back up in there 2 finish killing our once thriving economy. U have blamed everyone and everything when all u had 2 do was look in the mirror 2 c where the problems lie. I have Faith we will recover one day but not under DEM who have brought us 2 poverty’s door and still ain doing nothing positive 2 ease the squeeze.

  4. Princess Tiny Neferua
    Princess Tiny Neferua June 7, 2014 at 3:11 pm

    You are so right Mr Finance Minister..who the heck are these people…It’s a down right conspiracy….Moody have no idea what they are talking about..because right now our economy couldn’t be more stable….right?????

  5. Nelson Darwin
    Nelson Darwin June 7, 2014 at 3:52 pm

    What an epic, gargantuan, dumbass.

  6. Angel OfThunder
    Angel OfThunder June 7, 2014 at 4:01 pm

    Them created this problem with no solutions what they think will happen its go blow up n them face..

  7. J ames Franks June 7, 2014 at 4:04 pm

    Same old Chris, same old excuses and always behind the curve !!

  8. Carib Digita
    Carib Digita June 7, 2014 at 4:22 pm

    As the Jamaicans’ say “Talk bare Chat…. Chat, chat, chat.” Zero confidence…

  9. Francis McClean
    Francis McClean June 7, 2014 at 4:38 pm

    Man got muh pon mute den. Who feels it knows it and right now all ah Buhbadus feeling it. Fuh real.

  10. Julia Whitehall
    Julia Whitehall June 7, 2014 at 5:02 pm

    I guess we will all wake up when the dollar has devalued and by then its too late.That would be a very sad thing to happen and nobody has ever recovered from a devaluation.

  11. Daniel Polonis
    Daniel Polonis June 7, 2014 at 5:28 pm

    To be fair to the Honorable Minister…Moody’s is the is the same company that gave the U.S. a AAA rating when indeed the financial crisis was in full bloom. with that said Moody’s is not the most best source. But everything the minister is throwing up was reactive not proactive….They are 5 years late and maybe too late to stop devaluation. But to stand and say “we will stand shoulder to shoulder” is a disservice to hard working Bajans everywhere. Will he and his Co-broker be returning the “finders fee” for selling a certain commerical building? Or return the money given to a certain person in a brown paper bag to get permission to build a hotel in St. Phillip? the list goes on and very few politicians are clean on either side. Be straight with the country..because the only people your fooling are yourselves and the people will pay the price for this not you struggling politicians with your 10% travel allowance cuts.

  12. Di-sharon Boyce
    Di-sharon Boyce June 7, 2014 at 5:52 pm

    What the NCF wanted donkey, and i will say it all the time murdaaaaa haaaaa falling off my chair

  13. Robert Holloway
    Robert Holloway June 7, 2014 at 6:11 pm

    All countries are examined on a regular basis so given the next evaluation one could expect a new Bn based on factual evidence.. Time will tell, one can only hope

  14. Noel Jones
    Noel Jones June 7, 2014 at 7:30 pm

    Princess Tiny just being sarcastic read between the lines ok

  15. Lynette Mayers
    Lynette Mayers June 7, 2014 at 8:13 pm

    He always huffing and puffing…….only HOT AIR.

  16. Ali Johannes
    Ali Johannes June 7, 2014 at 8:29 pm

    It’s always somebody else’s fault

  17. David E Hall
    David E Hall June 7, 2014 at 10:10 pm

    The Buffoonery contest among Government Ministers to see who can talk the most @3*&*# continues.

  18. Janette Reifer
    Janette Reifer June 7, 2014 at 10:37 pm

    We must trust and believe every word you say. You speaks the truth all of the time, so we have no fear everything is alright. You are most righteous when all righteous are dead.

  19. ricardo June 7, 2014 at 10:43 pm

    princess tiny you seems to be living else ,you cant be living in barbados period and using them kind of statement

  20. Ricardo Bascombe
    Ricardo Bascombe June 7, 2014 at 10:44 pm

    this government is a waste


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