Belize Suffers S&P Credit Rating Downgrade

by Mike Godfrey, Tax-News.com, Washington

11 April 2005

Standard & Poor's Ratings Services has lowered its long-term foreign currency sovereign credit rating on Belize to 'CCC' from 'B-' and its long-term local currency sovereign credit rating to 'CCC+' from 'B,' citing the country’s mounting liquidity problems and worsening debt.

The outlook on the ratings remains negative.

"The public sector's liquidity position is especially dire in 2005, hampered by massive amortization needs as compared to available assets," observed S&P credit analyst Olga Kalinina.

"At the same time, access to external financing is limited and Belize continues to suffer from an unstable political environment," she added.

According to S&P, for 2005, Belize's financing gap is estimated at US$504 million, or 560% of usable reserves. The country's financing needs include covering the external current account of US$184 million, and public sector amortization payments of US$170 million.

Kalinina also went on to explain that the government's upward debt trajectory has been difficult to reverse, due to persistent fiscal slippages.

"The ratings may fall further if the government does not succeed in boosting international reserves, including failure to receive expected proceeds from the sale of Belize Telecommunication Limited shares, or if the external imbalances increase pressure on the Belizean peg," noted Kalinina.

"On the other hand, if the government surmounts its liquidity crunch this year and takes decisive effort to consolidate its fiscal position and stabilize the political environment by addressing the issues of public discontent (lack of transparency, poor financial management), thereby restoring the confidence of the financial markets, the outlook may be revised to stable," she concluded.

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