Rotten mood

Government will not be dictated to by ratings agency

The Freundel Stuart administration has all but rubbished the latest Moody’s report on Barbados, in which the United States-based credit rating agency has further downgraded it’s bond rating and issuer rating to Caa1, while changing its outlook to stable.

Today, a senior spokesman for the administration stopped just short of condemning the international rating agency’s latest report on the island’s economic performance to a garbage heap outside Government Headquarters for collection by the Sanitation Service Authority (SSA), as was done by the Prime Minister himself on the last occasion Moody’s was thought to be attempting to “dictate” to the island.

“What they say is only relevant if we want to embark on an orgy of foreign borrowing in which people should know how much we should have to borrow, how much our money should cost.

“But if we are not intending in the short or medium term to go to the capital markets to borrow money, what they say has as much value as what you would see in any garbage dump collected by the Sanitation Services Authority,” the Prime Minister had said then.

That was two years ago, when the agency had downgraded the island from BA3 to B3.

Back then, Minister of Finance Chris Sinckler was equally dismissive of the US-based ratings agency, saying it was clear that Moody’s had “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.

While no official response has been forthcoming from either Stuart or Sinckler to the most recent Moody’s downgrade, one official, who spoke to Barbados TODAY this afternoon, described the action by the New York-based ratings agency as “illogical” and “contradictory”.

In this regard, the official noted that there was evidence in the Moody’s press release issued at the weekend that not only had the economy stabilized, but that “the deficit has been reduced from 11.2 per cent in 2014 and was projected to reach 5.5 per cent by end 2016 and that economic growth had resumed following a resurgence in tourism, construction and lower oil prices.

“They even have a generous growth prediction of 1.5 per cent for this year, which incidentally is the same as the Government’s prediction and much higher than the Caribbean Development Bank’s forecast of 0.8 per cent for Barbados.

“And to top it off, in spite of expressing concerns about the debt, the deficit and the reserves, the so-called drivers for the downgrade, they put the outlook as stable.

“So that Moody’s’ principal occupation seems to be with Government implementing a massive fiscal adjustment programme in the shortest period of time to achieve a statistical target of a two per cent primary surplus at which point they believe debt growth with cease,” said the official, who did not want to be identified by name.

The official also suggested that Moody’s continued to sing from a similar economic hymn sheet as the International Monetary Fund and Standard and Poor’s, which he said also seemed to be insisting on “purely statistical targets” in the financial balance sheet while “totally ignoring the attendant massive social dislocation and disorder such actions will almost definitely cause” in a small fragile economy and society like Barbados.

However, “there is not only a financial balance sheet Government has to concern itself with, there is a social balance sheet to think of,” he warned.

“And while Government has and continues to move to reduce its deficit and stabilize its debt, it must and will be done at a pace that the society – its households and businesses- can tolerate.”

During last month’s Estimates debate in Parliament, Sinckler had indicated that it was Government’s intention to continue its fiscal consolidation programme with the goal of achieving a 2.5 per cent or lower deficit by 2018 and thereby stabilizing debt growth.

The official also questioned the ratings agency’s conclusion that foreign reserves have reached a level that threatened the fixed exchange rate, arguing that “nothing could be farther from the truth as reserve levels are not only above the accepted internationally accepted minimum levels of 12 weeks of imports, but continued stronger tourism performances, increased public and private capital inflows associated with infrastructure projects, low oil prices and relative low foreign debt service requirements, have and will continue to ensure that the normal daily patterns for foreign exchange transactions continue over the medium to longer term.

“So the basis for any downgrade is clearly undermined not only by Moody’s own conclusions, but by the obvious facts,” he said.

Over the weekend, the Opposition Barbados Labour Party spokesman economist Ryan Straughn said he viewed it as the clearest indication yet that Government’s homegrown Fiscal Stabilization and Economic Revitalization Programme had failed.

“Barbadians should be aware that Moody’s basis for its ratings action was predicated on their estimate of the fiscal deficit of 5.5% of GDP,” said Straughn in response to Moody’s.

“This is quite significant since the Minister of Finance presented a figure of 6.3% of GDP for 2015/2016 during the debate but further rather than fiscal consolidation, the Freundel Stuart administration approved an Appropriations bill for a deficit of 7.8% of GDP for 2016-2017,” the Opposition spokesman argued, while warning that based on Moody’s analysis this will set the country up for a further downgrade “over the next 12 months or so”.

However, in dismissing Straughn’s comments, the official said the “best of all worlds intervention by the junior Opposition spokesman” reflected “the typical, criticize everything disease plaguing the Opposition.

“If the Opposition believes the Government’s programme for fiscal consolidation has failed, then they ought by now to tell the public what their programme for fiscal consolidation will look like.

“It is not enough to say the Government’s programme is failing and that Government needs to cut expenditure.

They should tell the public how and from where this massive cut in expenditure will come,” he added.

He stressed that while the ratings agencies have been seeking to push Government to make a “massive adjustment in the shortest space of time which the society itself would not be able to withstand.

“We have opted for a more gradualist approach,” the official said, stressing that 2018 was the administration’s own target date for stabilization of debt growth.

Asked to respond to concerns issued about Government’s debt, which according to the World Economic Forum’s latest Global Competitiveness Survey is among the top 17, he maintained that debt was only a problem when you can’t service it. The official said Government was not currently under any pressure to service its debt.

He also said Government continued to monitor its foreign reserves position every day and “the money is there to defend our currency, should there be a need to”. (KJ)

15 Responses to Rotten mood

  1. Graham B Bannister
    Graham B Bannister April 5, 2016 at 5:33 am

    What makes sinckler and the pm qualified to even comment in the Moody downgrade.. a lawyer and a a a… whats sincklers profession again?

    Reply
    • Carson C Cadogan April 5, 2016 at 8:22 am

      …….Graham, you forgot to mention that Sinckler and PM are BLACK and the people at Moodys are WHITE. How dare the two of them to challenge WHITE people. They cant know as much as Moodys, after all they are BLACK!!!!

      Reply
  2. Sunshine Sunny Shine April 5, 2016 at 6:13 am

    Moody downgrades, the PM rubbishes. I with the PM, our economy is far better than the Moody downgrade and the PM and Chris Sinckler will soon provide proof to contradict the nonsense of Moody’s bias towards the Barbadian economy. All you Mr. PM show us why Moody is wrong.

    Reply
  3. lennox hewitt April 5, 2016 at 6:18 am

    Ok so prove moddy round then

    Reply
  4. Harry April 5, 2016 at 6:35 am

    This Govt is a first class example of the definition of insanity “doing the same thing over and over and expecting a different result each time”

    Reply
    • Donild Trimp April 5, 2016 at 11:47 am

      Harry, you are clueless.

      Read the below paragraph, digest and understand it, then return with a sensible post as it relates to BARBADOS.

      “The official also suggested that Moody’s continued to sing from a similar economic hymn sheet as the International Monetary Fund and Standard and Poor’s, which he said also seemed to be insisting on “purely statistical targets” in the financial balance sheet while “totally ignoring the attendant massive social dislocation and disorder such actions will almost definitely cause” in a small fragile economy and society like Barbados”.

      Can you imagine what would have happen to Barbados by now if the Gov’t had gone to the IMF.

      The Senior Official for the administration is correct. The Moody report belongs in the garbage dump.

      Reply
      • Sunshine Sunny Shine April 6, 2016 at 6:02 am

        Ain’t you a colossal representation of wasted brain power. Who stands to lose the most in this tussle between Moody and the senior official? Do you think that the current analysis proffered by the senior official is helping in any way consolidate Barbados economic position? Moody can be the evil Ogre and Barbados the little princess. The only way you can topple the big bad Ogre is by strategy and consolidating your position to one of strength. Do you know what is the difference between a first class passenger in crashing in a plane and one who is in economy class? So what if the senior official is right, Barbados still in ducks guts and Moody is downgrading.

        Reply
  5. Loretta Griffith April 5, 2016 at 6:39 am

    In some ministries there are too many square pegs in round holes making critical decisions that are affecting the lives of the citizens of this beloved country.
    I am beginning to think if you want to command a ministry you should offer yourself to the electorate, not hiding in the background and then surfacing to become a minister when those who have risked their money have to take a backseat. Especially for two terms and not offering themselves as candidates. Where is the accountability?

    Reply
  6. BaJan boy April 5, 2016 at 7:47 am

    Let us bet that when the Moody’s contract is up for renewal this Government will not renew it. These empty,headless ducks continue to embarrass a once proud and highly intelligent nation to the world. Freundel Stuart and Chris Sinckler should be shame to speak or even come back to Barbadians and beg for a vote.

    Reply
  7. BaJan boy April 5, 2016 at 7:50 am

    Let us bet that when the Moody’s contract is up for renewal this Government will not renew it. These empty,headless ducks continue to embarrass a once proud and highly intelligent nation to the world. Freundel Stuart and Chris Sinckler should be shame to speak on anything as they don’t have the moral authority nor the brains and should even be ashamed to come back to Barbadians and beg for a vote.

    Reply
  8. jrsmith April 5, 2016 at 8:46 am

    The Government seems not to realize , that the local bajan person is feeling the economic pressure more so than 3 decades ago , when Barbados was doing fairly well, how well is Barbados doing at present when you have a 13% increase in tourist traffic and this made no different to the economy. We have a bunch of people trying to run (BARDADOS LTD) who are in over they heads. Playing a hit and miss game with the lives of us bajans…

    Barbados should be and must be affordable to bajans , the only persons who seems to be affording Barbados is the tourist who visit for they short stay ,pick up they tans enjoy themselves and leave bajans to face the real local music…

    Reply
  9. Andrew Rudder April 5, 2016 at 10:17 am

    The”Rock” is plagued by a political tug-o-war that only seem to be misleading for Nationalism! Terms are only periods! A Nation has to be a life time of productivity and environment for its youth!

    Reply
  10. Carson C Cadogan April 5, 2016 at 10:53 am

    I back the Govt. 100 % in its stance.

    “….. he said also seemed to be insisting on “purely statistical targets” in the financial balance sheet while “totally ignoring the attendant massive social dislocation and disorder such actions will almost definitely cause””

    Just an example, the Govt. could wipe the financial difficulties with the Transport board with one fell swoop as the IMF, another agency which wants to strangle Barbados, is insisting, by raising bus fares to $6.00 per trip. But what would that do to Bajans?

    Reply
    • Sunshine Sunny Shine April 7, 2016 at 3:19 am

      Honestly! Raising bus fares to $6.00 might just be the incentive needed to start Abrams bicycle initiative. It might also be the raise that raises tensions in the commuting public for transport board and public service vehicles to move from disgusting, noisy and smelly to ones that make buses more comfortable, relaxing and aesthetic pleasing. So DLP fowl cock, I think raising bus fares might not be such a bad idea after all.

      Reply
  11. Tony Webster April 5, 2016 at 1:31 pm

    @carson. Hmmm….we have summuch lawyers on de front bench…why not just sue dem for defamation, and damages? The latter would be paid to us..in USD…a win-win Carson. GO FOR IT!!

    Reply

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