Moody’s downgrades Barbados

On the heels of last week’s Standard & Poor’s (S&P) downgrade, Moody’s has downgraded Barbados’ Government bond and issuer ratings to Caa3.

In a press release issued today, the New York-based international ratings agency highlighted Government’s rising debt and its very limited prospects of fiscal reform. It also said that as a consequence, rising domestic and external financing pressures were very likely to impair the Government’s ability to service its debt.

The development comes on the heels of this week’s presentation by Minister of Finance Chris Sinckler of the 2017-2018  Estimates of Revenue and Expenditure,  in which Government is proposing to spend $4.5 billion for the coming fiscal year, with a whopping $1.8 million due to go towards debt serving. A deficit of 4.4 per cent of GDP is also projected, down from the current eight per cent of GDP.

Prime Minister Freundel Stuart

It was just yesterday that Prime Minister Freundel Stuart — without making mention of any ratings agency — sternly warned that Barbados had long passed the days when it needed external validation from “metropolitan capitals”.

And while likening the grading of an economy to the marking of an examination, the Prime Minister also made it clear that he was not about to let anyone from outside — let alone any external marker — “shame” Barbados into thinking it had failed.

To do that, he said, would belie the country’s proud boast of 50 years of Independence and take it back to a day when approval was needed from outside.

“We seem now to be working ourselves back into a frame of mind where once again we want to sit exams for people outside of Barbados and wait on them to grade us and if they tell us we have passed we are supposed to feel good that we have passed, and when they tell us we have failed we are supposed to hold our heads in shame and think that we are failures,” Stuart told the gathering for a presentation of $10 million in equipment by the Chinese Government at the Ministry of Education yesterday morning.

It was his second such economic rebuff after S&P downgraded Barbados to ‘CCC+/C’ based on its limited financing alternatives and low international reserves.

The New York based agency also issued a negative outlook for the island, while warning that the sustainability of the Barbados dollar was now under threat, amid Government’s continued reliance on the Central Bank to finance its deficit.

However, unlike S&P, Moody’s has maintained a stable outlook for the island.

 Following is the Moody’s press release:

“Despite the government’s efforts to contain the fiscal deficit and alleviate pressures on foreign exchange reserves, the fiscal deficit remains large and credit risks have increased in Barbados. The debt burden has risen in recent years and will continue to do so for the next few. Domestic and external liquidity pressures on the sovereign have increased. We assess the likelihood of a credit event in the near-term as very high, given lack of fiscal adjustment and increasingly limited financing options.

First Driver: The continued increase in government debt and very limited prospects of fiscal reform.

Although macroeconomic conditions in Barbados have stabilized with a pick-up in growth, driven by rebound in tourism and investment in the sector, the fiscal deficit remains high.

The economy grew by 1.6% in 2016 after reporting anemic growth of less than 1.0% since 2010. The drop in oil prices and an increase in tourist arrivals temporarily alleviated some of the mounting pressures on foreign exchange reserves. However, reform efforts to address persistently large fiscal deficits since 2014 have not achieved a meaningful turnaround in fiscal performance, leading to what we consider to be an unsustainable increase in the government’s debt burden.

The government debt burden reached 111% of GDP at end-2016, and the authorities have accumulated a large stock of arrears to the private sector and the National Insurance Scheme, estimated at a further 11% of GDP at end-FY2015/16. Large refinancing requirements and the high interest burden, which consumes around 27% of government revenues, pose increasingly severe credit risks.

Given the scale of the fiscal and structural reforms needed to correct the rising imbalance, the likelihood of a credit event is now very high.

Second Driver: In consequence, rising domestic and external financing pressures that are very likely to impair the government’s ability to service short-term debt

With commercial banks having reduced their exposure to the sovereign, the government has become increasingly reliant on short-term debt issuance, financed by the Central Bank of Barbados, to meet the rising refinancing and interest costs. The rapid increase in short-term debt since 2013, allied with the large financing gap, imply mounting concerns about rollover risk. In 2016, the central bank was the only source of new financing for the government. As of end-2016, the central bank’s holdings amounted to 34% of outstanding short-term T-bills, equivalent to 13.2% of GDP. The central bank’s unwillingness to increase its exposure to the government would trigger a credit event.

External financing pressures are also high and rising. A number of factors, in particular maintaining the peg to the US Dollar, caused the stock of international reserves to drop significantly last year coming to USD 340.5 million in December from USD 463.5 twelve months earlier. This is the lowest level of reserves recorded since 2009, and only half the average level observed between 2009 and 2012, equivalent to under 11 weeks of imports at end-2016, compared to 13.6 weeks and 14.7 weeks in 2014 and 2015, respectively. The persistent decline in reserves continues to pressure the exchange rate peg.

Rising refinancing pressures dominate more positive credit features. Those include Barbados’ moderately strong institutions, high governance indicators relative to peers, and 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% f government debt denominated in foreign currency. The sovereign rating is also constrained by relatively weak growth compared to peers, and by the significant fiscal challenges.


The stable outlook on the Caa3 rating reflects the high probability of a credit event in the next 2-3 years, and reflects a balance of risks between lower and higher levels of loss given default.


Upward pressure on the rating could build if the government initiates a credible fiscal consolidation program to arrest the rise in debt-to-GDP ratio and put debt on a sustainable downward trajectory. 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 would most likely come under additional downward pressure if, following a restructuring, losses imposed on creditors exceeded 35% in NPV terms, the highest level consistent with the Caa3 rating.


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

GDP per capita (PPP basis, US$): 16,670 (2015 Actual) (also known as Per Capita Income)

Real GDP growth (% change): 1.6% (2016 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 1.7% (2016 Actual)

Gen. Gov. Financial Balance/GDP: -8.2% (2016 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -4.6% (2016 Actual) (also known as External Balance)

External debt/GDP: [not available]

Level of economic development: Low level of economic resilience

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

On 06 March 2017, 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 institutional strength/framework, have decreased. The issuer’s fiscal or financial strength, including its debt profile, has materially deteriorated. The issuer has become more susceptible to event risks. “


37 Responses to Moody’s downgrades Barbados

  1. Gavin Dawson
    Gavin Dawson March 9, 2017 at 9:54 am

    Wonder how the PM WILL TAKE THIS?sorry to busy getting into bed with the Peoples Republic of China.
    Why does he not go and live in China?they are HIS friend. For the time being.

  2. Kamila Burrowes
    Kamila Burrowes March 9, 2017 at 9:57 am


  3. bradg March 9, 2017 at 10:02 am

    Cant’t say I’m surprised, this was to be expected. With an inept Administration, these downgrades will continue to come so long as they are in power!! Its going to be a long road for Barbados to dig itself out of this mess.

  4. bradg March 9, 2017 at 10:08 am

    You would think that Government with no money….would actively and aggressively go after the people that owe it $1 billion dollars ( those that can afford to pay and don’t pay!!). You would think that they would address the Auditor General’s report and do somethinge about the leakage that’s taking place……but no…..what they do??? Tax us to oblivion.. and don’t pay people their Income Tax and Vat refunds!!!
    I am fed up!!

  5. Brewster March 9, 2017 at 10:55 am

    The Prime Minister is either sleeping while he talking or talking while he sleeping! Need to get rid of he fast! The place crumbling an he talkjng a lotta BS!

  6. Gearbox1964 March 9, 2017 at 11:01 am

    Freundel obviously knows no shame…in other words he’s just a stubborn bold-faced fool. Man hurry up and ring de bell do!!

  7. Frank Fowler
    Frank Fowler March 9, 2017 at 11:18 am

    Soon Moody’s and S&P are going to run out of letters to grade us with.

    • Gearbox1964 March 9, 2017 at 11:40 am

      LOL…you ain lie.

    • Gavin Dawson
      Gavin Dawson March 9, 2017 at 1:05 pm

      Frank Fowler,heading that way fast, but the Chinese are our friends they’ll help us out, But at what cost? Rip van Winkle will be asleep or out of it when this happens.

    • Frank Fowler
      Frank Fowler March 9, 2017 at 2:54 pm

      With friends like that I’d be worried what the end game is.

  8. James Franks March 9, 2017 at 12:06 pm

    Further inevitable downgrades to come, but the dum Government lack any understanding as to the gravity of the situation and remain in denial that there is any, or ever was a problem.

  9. Arthur Collymore
    Arthur Collymore March 9, 2017 at 12:09 pm

    We’ve become all too accustomed to these downgrades & like the PM, they will soon begin to feel unimportant, of little relevance. However, we are well aware of the impact longer after Stuart demits office. After we march on Saturday let us do what I have done, join with your BLP candidate & canvass your constituency to ensure that we rid ourselves of this incompetent DLP admin.

  10. Tony Webster March 9, 2017 at 12:59 pm

    Sir Erskine Sandiford might on reflection, re-phrase his querulous comment, about “How we get back here?”. More accurately, Sir, we are waaaaaay lower, than the point at which you fell upon your sword….with a little help from your friends. So you have, in effect,retained some personal dignity in the process.

    One wonders, and ponders, all the possibilities that hide in plain sight before our parliamentarians, and our maximum leader. Some, ostensibly posess backbones, as well as cojones, but appear loathe to use either.

  11. John Q March 9, 2017 at 1:33 pm

    Once again, in denial; never thought I would ever say this , but I’m glad I moved away; can’t stand this “government “

  12. Jerry March 9, 2017 at 1:36 pm

    The government cannot save Barbados only the Bajan people can by removing the pressure on the foreign exchange ad high cost of living. Stop driving vehicles with 1,person in it when everyone is going in the same direction .stop driving all over the place for no good reason. Stop buying all of the imported junk food that has no food value and is making everyone sick from diabetes and heart problems. It has to be everyone without exception and excuses. Stop the waste and shrinkage and brown envelopes which cause everything we purchase to be 20 percent more expensive and makes the island uncompetitive both for locals and visitors. Taken collectively it would save close to 1 billion dollars.

  13. Angus Benn
    Angus Benn March 9, 2017 at 1:41 pm

    Downgrade don’t bother the prime minister they wasting there time.

  14. Angus Benn
    Angus Benn March 9, 2017 at 1:43 pm

    All the prime minister is thinking about, is to win a third term.

  15. lester March 9, 2017 at 1:58 pm

    My fellow barbadians be patient and do not allow your political suasion caused you to speak out of line, our country is in trouble because we trust these politicians, we shout, dance and defend them when it suits us, we actually glorify them on both political divide not realising that they are human just like us, ALL politicians are the same the job pays well, why not trust the God of heaven, he has the answer for us, when the bees take office it will be de ja vu, the blame game will continue unabated
    Prayer works

    • hcalndre March 9, 2017 at 3:03 pm

      Lester, I hope your pray is heard. Do you think that the PM and Maureen is not praying?

  16. jrsmith March 9, 2017 at 2:02 pm

    @, Bradg, hail, hail, hail, on the button ,on the spot, for months I kept on about the (Audit General’s) report and why our barbados politicians has totally ignored a report , which was never challenged….why, why not..

    We are broke , while the millions being made by the tourist industry is transferred out of barbados daily, by companies who suppose to owe the barbados taxpayers 100 of millions of dollars… (or this is a lie ) (a smoke screen ), politicians need to step up and tell the bajan people the truth, be honest for once in they lives………………….
    To (TODAY ) if you all are not scared you should publish that report again… the (Audit General’s) ………………………………

    • Jennifer March 9, 2017 at 11:35 pm

      Jrsmith – hail, hail. What you are describing is nothing more than and extension from the slave days. Cant touch massa and his millions. They feed and suck and move on eventually.

  17. Lee R March 9, 2017 at 2:22 pm

    Only the gov’t and their loyalist believe that nothing is wrong with the economy. Ten thousand Frenchmen cannot be wrong. We need a new path and vision for this country.

  18. seagul March 9, 2017 at 2:56 pm

    Barbados has no resources people. We are just a beach wake up. When the PM is gone the same will continue. We’ll still be owned by the same people

  19. Mark Skinner March 9, 2017 at 3:55 pm

    Shoot the messenger!

  20. Sarah Walcott March 9, 2017 at 4:28 pm

    And the “best” part: Freudel continues to live in his ivory tower and remains in complete denial. Is he blind in both eyes? Does he see what is going on on the island?

  21. tom brabenec March 9, 2017 at 4:50 pm

    Barbados has proven that 50 years of independence has done nothing but indebted the country year after year and has sunk the country into financial crisis. Furthermore the island has proven to be incapable of running its own country. what a shame!

  22. jrsmith March 9, 2017 at 4:55 pm

    @, Seagul, hail , hail, think of this , the new president of the (US) said if you are going to put your country in debt, you make sure the infrastructure is sound….Our politicians have failed bajans /barbados for the past 4 decades , look at our infrastructure nothing is up to standard, nothing works not even the politicians themselves….
    Our country is in limbo because this group of politicians is standing in the way of progress , they dont know what to do totally incapable of managing (barbados LTD)……
    Although things are bad barbados starts at a much higher level than most countries in the world…
    My take finding 1 billion (US) dollars , one billion Bds to pay of as much as possible of the external debt, the other billion getting people back to work bringing all of the infrastructure up to parr..
    this would take a good deal of almost 3 years , this would give a chance to our young people to explore a small cottage industry with they ideas….
    The agriculture sector would be the main stay of our economy this with all the technology and proper management to be able to service our local home market and setting up an export base, mainly looking at the (UK) market and learning from their technology………..the (EU ) cant last that long…….

    • Jennifer March 9, 2017 at 11:40 pm

      jrsmith – listen hun you are correct, it is all by design. Educate you enough for you to think that you can manage or run a country, while all you do is stay docile in the dark and run the country straight into the ground. And when you have had enough of your black failings you will sell out all of your silver to us to then we will subject you to how we originally had you. Only a fool cannot see this. BDBDBDBDBD

  23. sticks and stones March 9, 2017 at 6:16 pm

    over kill ,Saying the same thing nineteen times soon lose the intent and the effect

  24. sunshinecanada March 9, 2017 at 11:17 pm

    Chinese help dems win, now chinese, will help them lose,

  25. Jennifer March 10, 2017 at 12:03 am

    I believe that when Fruendel decides to make speeches that he is with some of his pooch licking associates firing some mount gay. Does it really matter whether internal or external who marks you exam paper and makes Barbados shame. You got an F plain and simple. Stop being in denial and egotistical.
    It makes you wonder what that external debt is???? And I do not know why this people do not stop boasting about 50 years independence. Only a JACKA$$ cannot see that Barbados is no where near “independence”. You so independent and don’t even know your name. Clone Clowns.

  26. jus me March 10, 2017 at 6:17 am

    FUMBLE don’t matter ,he History, just at the moment mouthing he way to the exit, trying to posture for history and a place in the history books as a saviour who heroically fought to the last against a tide of doomsayers.


    There is a future for us and that is very very bleak.

    When the full import of what this egotistical Moron has achieved lands four square on us, we very lucky if we have bread on the table.

    We are truly between the Rock and the Hard place.

    Don’t talk racialism to me Jennifer, the only colour its about is GREEN, the greenbacks that rule us.

    People all colours worked and earned ,what we politicians took, knowing and not caring that it would be difficult ,if not impossible,to pay back.
    Cos they all understand the ,Kicking the can down the street, methodology .

    We in such trouble, because none of we can rectify this situation.
    Its not a wave the Magic Wand moment.
    This is a long drawn out period of heavy suffering , these people done bring on us.

    There are no Saviours standing in the wings.
    Unless we all as stupid and as ignorantly BLIND as FUMBLE, we can see that we have ,like a farmer ,only choices of MANURE,
    all we have is different piles of SH**E, that stand in the wings.
    All waiting to fall on whats left and carry away their share.
    Live high on the Hog.
    Small island mentality, like FUMBLE.

    I tell you, get out and buy up all you can NOW,cos once these downgrades reach finality, we Bajun $ is only fit for the toilet use.
    Stock all you can, cos I see a lotta pain ahead.

  27. Manwolf March 10, 2017 at 7:46 am

    Mr. PM, Credit Agencies provide market intelligence in the form of credit ratings, research, analysis etc. You may not assign much importance to them and their ratings but investors do. These are the same investors that you want to attract to our island to invest. If they are going to risk their capital in Barbados then they will naturally expect a return that is consistent with the risk. As you must be aware, there is an inverse relationship between risk and rewards….the greater the risk the more rewards are expected.

    • Leah R March 15, 2017 at 10:42 am

      Exactly Manwolf!!! It doesn’t matter if we don’t want to borrow…which in itself is a fallacy….but if you believe that, well….but the real issue is that investors, people who want to come to do business in Barbados, people already here doing business are looking at the economic strength and stability of the country. If they think that the economy is failing, that the Barbados dollar is at risk of being devaluated, that their business might run into trouble JUST BY BEING HERE, then what will happen? So much money will take to flight. We have to find a way to increase production or there will be nothing to back our dollar. Production – for example in agriculture, manufacturing, IT innovation, education, medical tourism – is the only way we’re going to dig ourselves out of this pit (and I just hope that people are waking up to see how deep this pit is). The question is, with our current condition, how do we stimulate production??

  28. seagul March 10, 2017 at 10:41 am

    All current and former politicians should be forced through legislature to submit three quarters of their savings back into the B’dos economy towards infrastructure. There’s a great deal of the B’dos economy that would have to change. The money that is poured into the domestic economy builds up people’s capacity to live and it builds up the country, it builds up the physical infrastructure, and it builds up the human infrastructure. So I think it would be actually healthy for the economy in general. It may take a tremendous educational effort. But I think education is effective when it coincides with a changing reality people can perceive.

  29. Carson C Cadogan March 10, 2017 at 5:32 pm

    “MOODY’S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts”

    A former senior analyst at Moody’s has gone public with his story of how one of the country’s most important rating agencies is corrupted to the core.

    The analyst, William J. Harrington, worked for Moody’s for 11 years, from 1999 until his resignation last year.

    From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody’s issued during the housing bubble.

    Harrington has made his story public in the form of a 78-page “comment” to the SEC’s proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody’s processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.

    The primary conflict of interest at Moody’s is well known: The company is paid by the same “issuers” (banks and companies) whose securities it is supposed to objectively rate. This conflict pervades every aspect of Moody’s operations, Harrington says. It incentivizes everyone at the company, including analysts, to give Moody’s clients the ratings they want, lest the clients fire Moody’s and take their business to other ratings agencies.

    Moody’s analysts whose conclusions prevent Moody’s clients from getting what they want, Harrington says, are viewed as “impeding deals” and, thus, harming Moody’s business. These analysts are often transferred, disciplined, “harassed,” or fired.

    In short, Harrington describes a culture of conflict that is so pervasive that it often renders Moody’s ratings useless at best and harmful at worst.”


    Corrupt agencies passing judgement on Barbados. Being lap up by some misguided Bajans.

  30. Leah R March 15, 2017 at 10:31 am

    So then, Carson Cadogan, based on what you’re saying, since Moody’s and Standard & Poors are paid by Barbados to rate its debt, the ratings can’t be objective and they’re actually better than it should be!


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