NEW YORK – International credit rating agency, Moody’s Investors Service, has upgraded the government of Belize’s long-term foreign- and local-currency issuer and senior unsecured ratings to B3 from Caa2, stating that the country’s economic outlook is stable.
On Wednesday, Moody’s said the key drivers of the upgrade of Belize’s senior unsecured and long-term issuer ratings are the improvement in the government’s debt service profile and reduction in the risk of a subsequent credit event, following the recent restructuring of the government’s debt.
The rating agency said “lingering macroeconomic and fiscal vulnerabilities and risks to debt sustainability, which constrain Belize’s creditworthiness within the low ‘B’ category,” is also a key driver of the upgrade.
“The stable outlook reflects the balanced risks to Belize’s credit profile at the B3 rating level,” Moody’s said. “The risk of a subsequent credit event remains low through the outlook horizon, given the government’s more favorable debt payment schedule.”
The International agency said fiscal and economic challenges are likely to persist, adding that it believes that, despite the liquidity relief provided by the debt restructuring, “there is a low likelihood that upward pressure on Belize’s creditworthiness will develop over the next 12 to 18 months”.
Concurrent with the rating action, Moody’s has also raised Belize’s long-term foreign-currency bond ceiling to B1 from B2, and the long-term foreign-currency bank deposit ceiling to Caa1 from Caa3.
The short-term foreign-currency deposit and bond ceilings remain unchanged at Not Prime (NP), Moody’s said, stating also that the long-term local-currency bond and deposit ceilings have been raised to B1 from B2.
Moody’s said the first driver of the upgrade is the decreased likelihood that the Belizean sovereign will undergo a subsequent credit event, “given a more benign debt servicing schedule following the restructuring in March 2017”.
It said the March 2017 restructuring constituted the third such credit event since 2006 of the sovereign’s sole external market bond.
Under the terms of this latest restructuring, Moody’s noted that amortisation payments have now been postponed to begin in 2030, rather than 2019 under the previous terms.
The second driver is Moody’s view that “Belize’s persistent growth challenges and a high public debt burden will keep its susceptibility to event risk elevated, limiting further improvements in the sovereign credit profile beyond those obtained by liquidity relief from the debt restructuring”.
Moody’s said the March restructuring came amid multiple challenges facing the Belizean economy.
It said the economy’s performance has fallen “far short of the growth path envisaged by official projections in 2012-13 at the time of the previous restructuring negotiations”.
Moody’s estimates that real GDP contracted 1.5 per cent in 2016, that the fiscal deficit remained high at around five per cent of GDP and that central government debt likely reached 91 per cent of GDP.
Given Belize’s low potential growth (1.5 to two per cent), Moody’s said a debt burden above 90 per cent of GDP “severely constrains the authorities’ room for policy maneuver and limits the economy’s ability to absorb shocks”.
Moody’s said the stable outlook indicates that rating changes are unlikely in the near future. (CMC)
