Barbados Currency Ratings Lowered By S&P

by Amanda Banks, Tax-News.com, London

09 August 2004

Despite stronger economic growth in Barbados, ratings agency Standard & Poor’s has lowered its long-term foreign and local currency ratings on the jurisdiction, although it has maintained a stable outlook.

As a consequence of growing government debt, which has climbed to more than 60% of gross domestic product, and a rising current account deficit currently standing at 7.4% of GDP, S&P lowered its long-term foreign currency rating to ‘BBB+’ from ‘A-‘, and the long-term local currency rating to ‘A-‘ from ‘A+’.

"The downgrades reflect the government's decreased fiscal flexibility as a result of slower-than-expected deficit reduction and significant off-budget spending, even as economic growth has strengthened," explained Standard & Poor's credit analyst Philippe Sachs.

Still, economic growth rates remain rather modest according to Sachs, and a lack of new private sector job prospects is combining to hamper the government’s task in strengthening public finances.

He noted that the offshore sector might also face difficulties as the OECD presses Barbados to equalize its onshore and offshore tax rates.

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