Barbados downgraded

Moody’s Investors Service has downgraded Barbados’ government bond rating and issuer rating to Caa1 and changed the outlook to stable.

A statement from Moody’s said the decision to downgrade Barbados’ issuer and bond ratings to Caa1 and revise the outlook to stable from negative was driven by low level foreign exchange reserves and weak funding conditions, as well as slow progress towards achieving fiscal consolidation consistent with a suitable debt trajectory.

The US-based ratings agency also noted that macroeconomic and credit risks remain elevated in Barbados despite some progress to reduce the government fiscal deficit and contain pressure on foreign exchange

“Debt burden remains very high and additional fiscal consolidation is needed to reverse the rising trend in debt burden,” Moody’s said.

Moody’s also warned that slow progress to narrow the fiscal deficit to sustainable levels continue to put pressure on foreign exchange reserves, placing the exchange rate peg at risk.

Below is the assessment from Moody’s Investor Service:


..Issuer: Barbados

….Country Ceiling Bank Deposit Rating, Affirmed at NP

….Country Ceiling Rating, Affirmed at NP


..Issuer: Barbados

….Country Ceiling Bank Deposit Rating, Downgraded to Caa2 from Caa1

….Country Ceiling Rating, Downgraded to B3 from Ba3

..Issuer: Barbados, Government of

….Issuer Rating, Downgraded to Caa1 from B3

….Senior Unsecured Medium-Term Note Program, Downgraded to (P)Caa1 from (P)B3

….Senior Unsecured Regular Bond/Debenture, Downgraded to Caa1 from B3

Outlook Action:

..Issuer: Barbados, Government of

….Outlook, Changed to Stable from Negative


First Driver: Slow progress towards achieving fiscal consolidation consistent with a sustainable debt trajectory

Although economic conditions in Barbados appear to be stabilizing with the improved growth outlook and low oil prices, the recent and anticipated fiscal consolidation is unlikely to be sufficient to put the debt trajectory on a downward path. We project debt-to-GDP ratio to continue to rise over the next 2-3 years and will likely reach 110% of GDP by 2018 (excluding debt held by the National Insurance Scheme). Continued accumulation of government debt will slowdown relative to the past three years due to the expected pick-up in economic growth and the reduction in fiscal deficit; however these improvements will not be sufficient to put debt-to-GDP ratio on a sustainable path. After a five-year period of anaemic GDP growth of 0.3% on average, we expect growth to reach 1.5% in 2016, driven by a recovery in the tourism and construction sectors. We expect the fiscal gap to narrow to around 5.5% of GDP in the year ending in March 2016, from a peak of 11.2% in 2013. Despite these positive developments, significant fiscal challenges remain over the rating horizon. Particularly, high debt overhang and large funding requirements are important rating constraints, in addition to the high interest burden, which consumes around 27% of government revenues.

Continued fiscal consolidation to achieve a primary surplus of around 2% of GDP and a sustained recovery in economic growth would be necessary to stabilize the debt at the current level. Reducing the large debt overhang will require additional fiscal savings.

Second Driver: Low level of foreign exchange reserves and weak funding conditions

Foreign exchange reserves remain under pressure, after dropping by 19% since 2013. The slow pace of fiscal consolidation continues to pressure Barbados’ reserve buffer, putting the exchange rate peg at risk. The government has increased its reliance on financing from the Central Bank of Barbados, while commercial banks reduced their exposure to the sovereign. The rapid increase in short-term debt since 2013 raises concerns about rollover risk, while short-term funding pressures remain in the face of the government’s large financing gap.

Barbados’ credit rating reflects moderately strong institutions, high governance indicators relative to peers, and a stable political system that has historically supported a high degree of policy consensus. The government debt structure has relatively limited exposure to exchange rate risk with less than 30% of government debt denominated in foreign currency; however the debt profile is vulnerable to rollover risk on short-term debt. Financing through the domestic debt market mitigates some of the refinancing risks. The sovereign rating is constrained due to relatively weak growth compared to peers, and significant fiscal challenges.


The outlook is stable, reflecting the risk of further deterioration in debt dynamics on the one hand, balanced by the prospect that the authorities will continue to reduce the fiscal deficit in the context of an improved external environment and more supportive economic growth.


Upward pressure on the rating could build if the government accelerates its fiscal consolidation efforts, and puts the government debt-to-GDP ratio on a sustainable downward trajectory, and the economy maintains higher growth rates. These developments would likely be accompanied by reduced reliance on short-term debt and financing from the central bank, and a rebound in international reserves.


The rating may come under additional downward pressure if the government’s ability to service its debt worsens, or it faces challenges in rolling over maturing short-term debt. Renewed pressure on foreign exchange reserves and sustainability of the peg may also trigger a downgrade.


The long-term foreign currency bond ceiling is changed to B3, while the short-term foreign currency bond ceiling is unchanged at NP. The long-term foreign currency deposit ceiling is changed to Caa2, while the short-term foreign currency deposit ceiling remains at NP. The long-term local currency bond and deposit ceilings are changed to B1, while the short-term local currency bond and deposit ceilings remain unchanged at NP.

GDP per capita (PPP basis, US$): 16,365 (2014 Actual) (also known as Per Capita Income)

Real GDP growth (% change): 0.5% (2015 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 0.6% (2015 Actual)

Gen. Gov. Financial Balance/GDP: -5.5% (2015 Estimate) (also known as Fiscal Balance)

Current Account Balance/GDP: -5.2% (2015 Estimate) (also known as External Balance)

External debt/GDP: 34.8% (2015 Estimate)

Level of economic development: Moderate level of economic resilience

Default history: No default events (on bonds or loans) have been recorded since 1983.

On 30 March 2016, a rating committee was called to discuss the rating of the Barbados, Government of. The main points raised during the discussion were: The issuer’s fiscal or financial strength, including its debt profile, has materially decreased. The issuer has become increasingly susceptible to event risks.


14 Responses to Barbados downgraded

  1. Santini More
    Santini More April 2, 2016 at 5:25 pm

    Our economy is a car-crash….smfh

  2. Niccolo Costa
    Niccolo Costa April 2, 2016 at 5:33 pm

    Stop relying on these capitalist funded fake reports

  3. Ryan Henry
    Ryan Henry April 2, 2016 at 5:39 pm

    I getting tired as hell wid this downgrading crap……I know my economy is in the crapper but it will bounce back all it needs is new management. These constant downgrades promote nothing but sharks and predatory investors and lenders who take advantage of what resources and opportunities best handled by us as the case been so far. These same rating houses who pleaded the fifth and played dumb at congressional hearings were in bed with the same criminals that crashed wall street and rippling crippling effects for the worlds economies. ………as bad a manager sinckler and stuart are I say its time they butt to hell out our affairs, leave my country alone and clean your home pens first

  4. Ike Turner
    Ike Turner April 2, 2016 at 6:02 pm

    Call elections

  5. Bobby Gilkes
    Bobby Gilkes April 2, 2016 at 6:17 pm

    Well i know what Chris will tell you all …. Dont mind them they dont know anything about our economy lol

  6. Nicholas Mackie
    Nicholas Mackie April 2, 2016 at 9:14 pm

    Somebody is being moody!

  7. Pamalea Payne
    Pamalea Payne April 2, 2016 at 9:25 pm

    MOODY,,,,, Barbados yall better fight not to devalue this $$$$$$$ that’s what them want

  8. Vicky Briggs
    Vicky Briggs April 2, 2016 at 10:01 pm

    Look at Barbados and be honest with yourselves. It is a while now that BIM has been in the gutter

  9. Lawrence Griffith
    Lawrence Griffith April 3, 2016 at 12:38 am

    The best solution is for the politicians is to devalue the dollar. Take the losses for 5 years and rebuild the economy. That’s the best way forward for a small nation as Barbados. It’s NO need competing with the US dollar..

  10. dave April 3, 2016 at 2:49 am

    One thing is for certain . we are not at the top of the heap /
    I believe the DLP needs to demit Office. The DLP has failed miserably. Donvile Inniss for leader of the Opposition so that he can draw a salary and continue his good work as a parliamentarian

  11. seagul April 3, 2016 at 6:42 am

    The economy of the islands with the cost of living is getting higher and higher—the price of fuel, gas food. The educational system is failing our children. This reality as it is only leads to violence, so let’s clasp our hands and souls together. Let’s work towards a more social, friendly, humanitarian, charitable, educational, institutional, constructive and expansive society, and is founded by persons desiring to do the utmost to work for the general uplift of the people…..ajani–Deeper Soul

  12. McClean Marquita
    McClean Marquita April 3, 2016 at 11:47 am

    I really feel that is time to start a fashion industry in Barbados to bring in revenue for the country.

  13. Kool Rasta
    Kool Rasta April 3, 2016 at 11:58 am

    what i wud like to know is who grades them and on what scale,who gave them the right to tell a nation them aint up to standard or rather their kind of standards,we as a nation need to let the so call super powers f-off and stop trying to run n rule barbados for so long them was trying to devalue our dollar so them cud hold we at ransom n mek we do as them say ,but i say to all bajans like me stand firm n be strong in the lord n the power of his might Amen.

  14. Brerlou King April 4, 2016 at 12:49 am


    The IMF, the World Bank, and the rating agencies, of which the three largest are Moody’s, Standard and Poor’s and Fitch Ratings, are all creatures of capitalism created, out of necessity, by capitalism FOR capitalism. Their function is to provide information that is supposed to stabilize the world’s system of negotiable securities. However, they are so heavily influenced by their wealthy customers as to be almost useless, except as analysts, after the event.

    The IMF and the World Bank, are functionally insurance companies, created to provide the funding that insulates member economies against crashes caused by the bankruptcy of other unstable economies. They are NOT altruistic institutions created for the benefit of weak economies.

    Meanwhile, the uselessness of the rating agencies, such as Moody’s, as economic performance predictors, is clear, when we consider that these agencies failed to denounce the sale of real estate derivatives which precipitated the same world wide recession which is causing the backwardisation of the Barbadian economy.

    In reality they act as gate keepers, who march in lock step, and create false and often self-fulfilling prophesies, such that, first one and then the others, in succession, create a triple whammy, cascading, effect which suggests to investors that an economy is about to fail, thereby manipulating the RATES at which governments are able to borrow money. THAT’S ALL.


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