Moody's Investors Services downgrades Barbados' bond rating

B'bdos bond rating downgraded due weak funding conditions

Moody’s Investors Service (Moody’s) has downgraded the Barbados government bond rating and changed the island’s economic outlook to stable.

Moody’s said that its decision to downgrade Barbados’ issuer and bond ratings to Caa1 and revise the outlook to stable from negative was “driven by slow progress towards achieving fiscal consolidation consistent with a sustainable debt trajectory.”

Moody’s also said the decision stemmed from “low level of foreign exchange reserves and weak funding conditions.

“Despite some progress to reduce the government fiscal deficit and contain pressures on foreign exchange reserves, macroeconomic and credit risks remain elevated in Barbados,” the credit rating agency said.

It said Barbados’ debt burden remains very high, stating that additional fiscal consolidation is needed to reverse the rising trend in debt burden.

Moody’s said 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.

Moody’s said 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.