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Jamaica's bond ratings seen cut if fiscal slippages continue - Moody's
Last Updated: 29-January-2008 05:49:42
MUMBAI (Thomson Financial) - Moody's Investors Service warned it may downgrade Jamaica's bond ratings if fiscal slippages continue, as the current rating incorporates the expectation that debt ratios will improve, which now seems difficult to realise.
"Debt dynamics are complicated by persistently low growth, leaving the bulk of the adjustment to fiscal austerity and leaving Jamaica's fragile macroeconomic equilibrium continually exposed to a variety of shocks that have the potential to further increase the government's credit risk," the agency said in its annual report on the nation.
It noted that Jamaica's new administration intends to kick-start growth via a series of supply-side measures and fiscal restraint that would generate investment and overall greater business confidence. Moody's however said that, given the magnitude of the fiscal constraints, an unfavourable global growth outlook and the prospects for continued very high oil prices, there are important obstacles particularly for a small, highly indebted open economy like Jamaica. "Despite modest improvements over the past few years, the size and composition of the government's debt stock leaves interest payments still very vulnerable to pressure on either the interest or exchange rate," the agency added.
Moody's said the country's 'B1' foreign currency bond rating reflects the government's strong willingness to service obligations, a proven ability to respond to exogenous shocks and a commitment to fiscal discipline. Constraints include low growth and a large public debt burden that allows very little room to absorb shocks.