Central Bank says downgrade is unjustified
The Central Bank of Barbados has rejected the latest Standard and Poor’s credit rating downgrade of the country, saying it is without justification.
The international ratings agency yesterday lowered the island’s long-term sovereign rating to “B” from “BB-”, and warned that the potential for a further downgrade existed.
It cautioned that this was likely “if the Government doesn’t succeed in bringing down its wide fiscal deficit, if growth boosted by key investment projects fails to materialize, or if external pressures of persistent current account deficits mount”.
But in a statement issued today, the Central Bank defended the state of the economy, stating it was better than a year ago in every dimension.
“The foreign exchange reserves have stabilized and there is no longer a threat to the value of the Barbados dollar. Tourist arrivals have held up in 2014, and tourist expenditures are estimated to have increased modestly. Airlift has increased for the coming winter tourist season and the tourism outlook has improved. We are witnessing the beginnings of a turnaround in hotel and villa construction, upgrades and refurbishment of tourism facilities, and other construction. The growth of tourism and construction and spinoffs to retail and business services should yield growth of about 1.5 per cent in 2015,” the Central Bank stated.
“Government has demonstrated commitment and fortitude in addressing the fiscal deficit. The adjustment was front loaded, with the shedding of 10 per cent of the public sector work force and the introduction of university fees, along with tax and expenditure measures. Progress has been monitored and adjustments have been made throughout the year. In his most recent statement on December 16 the Minister of Finance made public the budgetary limits set for state owned enterprises, to achieve a fiscal target of no more than 7.2 per cent, a saving of 5.3 per cent, on the deficit for the last fiscal year.”
Additionally, the bank stated that Minister of Finance Chris Sinckler recently provided further evidence of Government’s firm commitment to fiscal consolidation.
It said, too, that servicing of Government’s external debt presented no challenges.
“We are confident in our economic strategy, and we will pursue it to success, with resolute determination and singleness of purpose,” the bank added.