Moody’s shock

International rating agency Moody’s has downgraded Barbados’ domestic currency rating from Baa2 to Baa3, and revised the country’s outlook to negative, but has affirmed its rating on Barbados’ foreign currency bonds.
Explaining the reasons for its decision, the New York-based agency said it had concerns about the capacity of the local market to absorb the increased levels of Government debt issuance at the same time the country was carrying a large current account deficit expected to increase further because of rising oil prices.
“Our view is that the Government’s debt ratios are likely to deteriorate further over the next 12 to 18 months to levels that are no longer consistent with an investment grade rating, given the small size and limited diversification of Barbados’ economy,” Moody’s said in a statement yesterday.
According to Moody’s, the downgrade of the domestic currency rating related to the agency’s view that Barbados’ primary credit strength, which historically enabled it to achieve a higher rating than the country’s foreign currency obligations, was the existence of a large captive market for domestic currency Government paper. However, Moody’s said this market had been eroded.
Read the full story in today’s DAILY NATION.