Stephen: downgrade was inevitable

President of the Barbados Economic Society Jeremy Stephen has said the latest downgrade by Standard & Poor’s (S&P) was inevitable, and was “very much in line with what  [it’s fellow international ratings agency] Moody’s has been thinking about Barbados for some time”.

S&P yesterday lowered the island’s long-term foreign and local currency sovereign ratings from ‘B’ to ‘B-’, saying that Barbados’ fiscal adjustment has again fallen short of stemming another increase in debt to GDP, which is already very high and a key credit constraint.

“Central Bank financing of the Government’s deficit continues, exacerbating Barbados’ financial and external weaknesses,” S&P said.

It added that the outlook on the long-term rating was negative, reflecting “a greater than one-in-three chance of a downgrade, if government is unable to lower its fiscal deficits, or if growth fails to strengthen, putting additional pressure on the country’s weakening external position”.

Stephen welcomed the focus on the persistently high level of debt, which continues to be a cause for concern.

“You’ve got some cases where interest expense is upwards of 35 per cent of tax revenue or more, and that is not a sustainable position.

“And still the Central Bank, though warned by the IMF to desist from funding the Government T bills the way it used to, or at least government financing or debt financing through the treasury bill market and other markets, it has continued to do so, I guess because of a lack of appetite from the commercial banking sector,” he said.

Jeremy Stephen
Jeremy Stephen

Stephen told Barbados TODAY the report was one of the first to cite a lack of private sector confidence as an issue, as according to him, “most people do know or are believing that the recovery that Barbados should have, that is with GDP growing from the one per cent that S&P is expecting, to about three per cent in about three years as they’re expecting, should be done on the back of private sector confidence”.

He also noted S&P’s concerns that it will become more difficult for the Central Bank of Barbados to defend the local currency peg of two to one to the US dollar if it continues to fund Government debt.

“It would be noteworthy at this time to recognize that the likelihood of interest rates being held internationally, or being held down internationally because of actions by the American Federal Reserve, interest rates should be expected to rise within the near future.

“This has been postponed and it is by the grace of providence that we haven’t necessarily been negatively impacted by global interest rates trending upwards, which would mean that not only sovereign or external debt may become more expensive in the future, it will,” Stephen said.

According to him, considering that most of the banks here are foreign-owned, and the Central Bank has liberalized the market for loanable funds,  “even more so than given the foreign nature of these banks that we would inherit higher interest rates in the future, maybe for loans, who knows.

“But we still have a rather liquid banking system that one would hope could be deployed towards private sector use.”

However, the economist said “because confidence is so damaged, and Government guarantees are few and far between, I’m not even sure if Government will be able to finance or spur private sector investment the way it would like.”

Stephen is therefore hoping that the Freundel Stuart administration will able to reverse this position “in quick time”, as according to him, it makes it more difficult for Government to refinance debt if they so choose.

19 Responses to Stephen: downgrade was inevitable

  1. Joan Wickham
    Joan Wickham September 24, 2016 at 9:53 pm


  2. recoanthony September 24, 2016 at 9:58 pm


  3. Lilian Lloyd
    Lilian Lloyd September 24, 2016 at 10:07 pm


  4. Ryan Bayne
    Ryan Bayne September 24, 2016 at 11:01 pm

    At least someone knows All about Barbados economy better than these class clowns in this government

  5. Phil September 25, 2016 at 12:10 am

    Bajans. Stop living in denial. devaluation is inevitable. Nothing will stop it from happening except a call for general elections. The printing of Barbados dollars exemplifies the fact that with a devaluation, it will require more Barbadian dollars to have local purchasing power. There are other signals there too. The ability to purchase freely over the counter items in US Dollars will not only create a blackmarketing of US Dollars but an increase in robberies especially gun point. Funkey Donkey and his team don’t get that.

  6. Sharon Taylor
    Sharon Taylor September 25, 2016 at 12:50 am

    Wow… Politics boy… Nuff haters ya does get!

    • Tristan John
      Tristan John September 25, 2016 at 9:57 am

      Everybody trying hard to get a slice of the cake next election. Can’t blame them either…

  7. Rawle Maycock
    Rawle Maycock September 25, 2016 at 2:46 am

    When I said,on talk yuh talk that the thing that’s only is holding the country up is the banking system as the Banks haven’t been downgraded.

  8. Brien King
    Brien King September 25, 2016 at 4:28 am

    Is it not profitable to those that Barbados owes debt to, to keep downgrading the country ? Because every time they downgrade Barbados, a lot more money is added on to the already large debt the country owes, making the country’s efforts to no avail. If it was possible for Barbados to actually get out of the debt it owes, these down grades would have little if any effect on the country. That’s why the government is trying to reduce spending so as to be able to bring down the debt even faster but government efforts would be in vain if they keep borrowing money to do stuff or those who they owe keep placing pressure on the country by purposely down grading the country , which in turn up grades or increase the money owed to who the country borrowed it from. It’s just a business tactic with much benefits to who the country owes money to, or a means to an end of generating more money out of a situation. Nasty business, that’s what I call it, there are people out there that will do whatever it takes to keep Barbados under foot.
    My advice to my country is, STOP borrowing money from anyone, we have to try our best to live off of what we generate and pull ourselves out this mess, if we are divided then we will fall but if we are united in our efforts, then we will rise and push that foot from off of us. Again I state this, Barbados NEEDS to get back SERIOUSLY into generating our food need from local means and STOP relying on imports. Remember this, it is profitable for those the country owe Debt to, to keep Barbados grade down.

  9. Tony Webster September 25, 2016 at 6:55 am

    This retired (or just plain tired) ex-Banker, used to think that “junk-bond grade” was the bottom of the garbage can. You know, like “penny stocks”….but applicable to financial obligations issued by “sovereign states”. Like us.

    I’m here reading this (indeed, since BT Today broke the news yesterady afternoon)….and I am still to come to grips with it.

    The monetary/ fiscal options remaining:-
    1. Sell-out to China.
    2. Sell-out to Putin.
    3. Join the EU, to take up Britain’s place at table.
    4. Adopt Zimbabwe model; start printing “Bond-Notes” at par with USD.
    5. Take stiff shot of Cockspur 8-star; summon all HOGS….and launch “CARICOM dollar”. No, do not use Government Printery…dem doan have paper.
    6. Change the God we been praying to all dese years .
    7.Call IMF, ask if they would like to chat over a nice buffet lunch over at Brown Sugar?
    Yes, give their representative three-four Rum Punches… before getting down to the “main course”.

    Bon Chance, Chris & Guv & Co.….no-one pointed a gun at you, to join dis fete!
    Lord…whu you ent hearing my prayers no nore?

  10. Hal Austin September 25, 2016 at 9:09 am

    I am amazed by thenaarrogance of Sinckler and the buffoonery of Stuart. I am also dkisappointedatthe apathy of theBarbadian public at alloingthe incompetent governmenttomdestroy the nation.
    On every policy level this government has failed.
    That the nation has been down-graded is no surprise. What is is how they have taken it.
    After eight years this government has failed to spell out a monetary policy, yet Sinckler is still puffing out his chest like an drunken monkey.
    I know from a single private conversation with David Thompson that had misfortune not stepped in things would have been a lot different.

  11. Alex Alleyne September 25, 2016 at 10:25 am

    Most of you keep speaking about “devaluation” , I wonder how most would fear if or when it comes. Please remember a devaluation of the dollar hits all not some. In the end , Chris and friends/company will still be able to buy a bread, 2 fishcakes and a mauby, leaving most of us looking towards the next party to free us.

  12. Hal Austin September 25, 2016 at 1:09 pm

    There has been an internal devaluation – prices are going up. The real task is to devalue against a basket of currencies and commodities.
    As things stand, our monetary policy is being determined by the Fed. We want our country back. Get rid of the fixed rate.
    What is the BLP’s economic policy?

  13. Alex Alleyne September 25, 2016 at 1:17 pm

    @Hal,I am not here or there on the political fence , but I ask the same question “What is the BLP’s Economic policy”?????. You are not just dealing with BARBADOS but must look at the wider WORLD. “Everybody say they can drive until they sit in the driver’s seat”.

  14. Hal Austin September 25, 2016 at 4:48 pm

    Sorry, I meant fix against a basket of currencies and commodities and decouple from the Greenback..

  15. The Negrocrat September 26, 2016 at 5:57 am

    Alex Alleyne, Chris is in the driver seat, but he is crash dummy.
    Tell me the name of another MOF with such a high failure rate.

  16. Haskell Murray September 26, 2016 at 8:57 pm

    Here is my take on the debt situation:
    1) Was the debt incurred because of capital expenditures.
    2) Was the debt incurred because of consumption expenditures
    3) Was the debt incurred because of election gimmicks

    If the debt was incurred because of item 1 , then change the accounting method and capitalize the expenditures instead of expenseing the expenditures 100% . By using the business model of accounting for capital expenditures the government will write it off over say 50 years and this will surely eliminate the deficit.

    If the debts was incurred because of items 2 and 3 then the government should eliminate most of the social programmes currently in place, but this may not be politically possible. The opposition will cry shame and the government will loose the next election, but sometimes you have to do what may be unpopular but the right thing to do.


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