‘Downgrade no cause for alarm’
Noted economist Jeremy Stephen today said the latest downgrade of Barbados’ bond and issuer ratings by Moody’s Investors Services should not be much cause for concern in the medium term.
Stephen suggested that a reversal was possible if the private sector led more initiatives and took equity risks on local projects.
The international rating agency lowered the bond rating to Caa1 and revised the outlook to stable from negative on the basis that the country continued to experience low levels of foreign exchange reserves and weak funding conditions, as well as slow progress towards achieving fiscal consolidation consistent with a suitable debt trajectory.
Stephen said the downgrade came as no surprise. However, he recommended that policymakers should view it as a call to quicken the pace of improvements if Barbados was to continue attaining funding from the usual sources.
“It is [also] a call for us to find more sources of growth as quickly as possible especially given the fact that the Government to its credit, to a point, is rather reluctant to do a very aggressive fiscal consolidation and since we are so far gone it is still necessary that we have to close the gap or to focus on very high [or aggressive] growth measures going forward,” he told Barbados TODAY.
The Barbados Economic Society president added that if Government continued to follow the current path “there will be pressure on the exchange rate especially given that we haven’t done much to reverse the slight downward trend in our foreign reserves” along with the threat of correspondent banking. (FW)