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Standard & Poor’s Lowers Barbados Sovereign to ‘B-‘ from ‘B’ (outlook is negative)

Prime Minister Mia Mottley shows off a Kensington Oval ready for T20 World Cup

worrell-sincklerBarbadians have become fatigue under the the constant negative feedback from armchair pundits and professionals like S&P. Where do we go from here? All the experts have painted a gloomy forecast EXCEPT the minister of finance Chris Sinckler.  Who are the citizens to believe Sinckler or all the other who are experts in the field.

The report from S&P explains the mouthing from Dr. Warren Smith who heads the Caribbean Development Bank who has advised government to privatize the Barbados Port Authority and Grantley Adams Airport. The following extract from S&P report confirms what the BU family has been writing about for a few years.

Who will act to stop the rot or it it too late!

However, usable international reserves, which we consider for assessing external liquidity, are even lower; we subtract the monetary base from international reserves because reserve coverage of the monetary base is critical to maintaining confidence in the exchange-rate regime. Barbados’ usable reserves have been negative since 2013, and the position continues to deteriorate, in part because of the central bank’s deficit financing, which has expanded the monetary base. We expect Barbados’ gross external financing needs to be above 200% of current account receipts (CAR) plus usable reserves. We expect narrow net external debt to average around 40% of CAR during 2016-2018. Our external assessment also considers that net external liabilities of a projected 170% of CAR during 2016-2018 are substantially higher than narrow net external debt. Finally, we note that Barbados’ International Investment Position has inconsistencies and is not timely.

Relevant Link

277 responses to “Standard & Poor’s Lowers Barbados Sovereign to ‘B-‘ from ‘B’ (outlook is negative)”

  1. Old Baje Avatar
    Old Baje

    Looks like we’re fucked.

  2. Hants Avatar
    Hants

    http://www.nhc.noaa.gov/gtwo.php?basin=atlc&fdays=5

  3. Gabriel Avatar
    Gabriel

    Old Baje
    Since 2008 and counting

  4. Pachamama Avatar
    Pachamama

    It’s time to give up on these meaningless metrics…………….consider a strategic default………………within a new framework………………..and more!

  5. Hants Avatar
    Hants

    “home operates on a battery-based grid interactive solar powered system, which most people call an off-grid system. The vast majority of Barbadians who have invested in a solar powered system have a grid-tied system and all of them would have been without power.”

    http://www.nationnews.com/nationnews/news/86178/finding-light-blackout#sthash.PXkQTaHY.dpuf

  6. David Avatar
    David

    For the illiterate and those suffering with yardfowlitis the first paragraph nails it.

    Rationale

    The government’s financial profile has eroded over the last several years because of persistently high fiscal deficits, reflecting both budget slippage and unbudgeted spending. The central bank continues to directly finance the government, which we consider at odds with its goal to defend Barbados’ long-standing currency peg with the U.S. dollar. The government deficits, coupled with current account deficits (CADs) not fully financed by foreign direct investment (FDI), have increased the country’s external vulnerabilities. We do expect economic growth to pick up during the next two to three years, but lackluster private-sector confidence, continued delays in several tourism projects, and potential spillover from Brexit should keep growth moderate. We expect per capita GDP growth to be around 1% in the next two years, comparatively low for a country at its level of income. The country’s per capita income, projected to be almost US$16,000 in 2016, is higher than that of most of its rating peers. That said, Barbados’ economy and the sovereign credit rating benefit from a low level of perceived corruption

  7. Bernard Codrington. Avatar
    Bernard Codrington.

    Old Baje and Gabriel,
    Obviously we are enjoying it.!
    Nothing new here. This is what we on the ground saw and felt. In any case the prognosis for the world outlook is GDP growth of under 2%.p.a. This could translate to higher or lower growth for Barbados, if we get our Economic strategy right. The Fiscal ratio is just a rule of thumb. The result of a political decision not to tax and not to reduce Public expenditure. Growth is the easy way out. But that does not depend on local public decisions alone.

  8. Tron Avatar
    Tron

    Told you so.

    Low work ethic, too many Wambenzis, too many holiday for employees, too many ministers, judges, bureaucrats and pastors.

    Good bye old Bim! Hello Uganda!

    What the establishment will tell you: At least one notch better than Moody´s.

  9. Due Diligence Avatar
    Due Diligence

    “That said, Barbados’ economy and the sovereign credit rating benefit from a low level of perceived corruption”

    Low level of perceived corruption?

    Compared to what?

    Obviously S&P analysts do not read BU!

  10. David Avatar
    David

    @Pacha

    If we are borrows we have to abide by the credit rating rationale applied to the country.

  11. David Avatar
    David

    @Due Diligence

    It is a perceived corruption index: you will have to find out who are the civil society players they meet with and if they read the AG report for a start. Will not mention Cahill.

  12. bajans Avatar
    bajans

    It is absolutely depressing. No wonder Delisle is running around the globe begging expatriates, who Bajans don’t like, to invest in Bim by buying his bonds.

  13. Tron Avatar
    Tron

    Given the current speed of downgrades, I grant Barabados another 3 years before we reach “D”-territory. The step between will be another downgrade to Caa3 (Moody) and C (S&P).

    There is no way out anymore. Barbados already got jamaicanized.

    Does the establishment care about? Absolutely not. They will resign in 2018 anyway with big pensions, some with villas in their homelands abroad. In the meantime, they will have their big party on 30 November, jumping up and down, clapping their hands, shouting and cocktailing.

  14. Wha Loss Dem Stupid Avatar
    Wha Loss Dem Stupid

    The Standard in Barbados is Poor

  15. David Avatar
    David

    What these downgrades continue to do is undermine confidence in the business/private sector. With all respect to the government and the MoF it doesn’t matter if the policies of government are theoretically correct, without public confidence in them, no can do.

  16. Wha Loss Dem Stupid Avatar
    Wha Loss Dem Stupid

    Time to pack up and leave. Will the last man (or woman) out please turn off the lights?

  17. David Avatar
    David

    In response to the constant downgrades expect the international finance companies operating in Barbados to tighten credit policy and to send home people.

  18. Tron Avatar
    Tron

    @bajans
    As I told you: Delisle risks personal charges under provisions on prospectus liability in Canada, USA and UK if he praises Barbados treasury bonds in foreign countries. A very clear case, indeed. No CJ Marston Gibson, no AG, no Barbadian habit of disobeying local laws will save him in front of a foreign court.

  19. bookworm Avatar
    bookworm

    Will the last person to leave switch the lights off.

  20. Wha Loss Dem Stupid Avatar
    Wha Loss Dem Stupid

    They will go drag out some banker to say things are improving and then given the bank something they have been wanting so as to improve the bottomline. Surprised at those who are willing to conspire to sink Barbados for their own narrow self interest.

  21. bookworm Avatar
    bookworm

    That photo of Dumb and Dumber is better than a thousand words! You right oldbaj, they f*cked us without the KY jelly!

  22. Tron Avatar
    Tron

    @David

    The big banks in Bim already tightened their policy since the middle of 2013. If you want, say a mortgage for 5000 BBD/month, you need to earn at least 25,000 BBD/month gross – not per year!

  23. bookworm Avatar
    bookworm

    Wha Loss Dem Stupid beat me to it!

  24. Wha Loss Dem Stupid Avatar
    Wha Loss Dem Stupid

    Chris will never have to work again and has a big enough war chest to ensure victory in opposition against the likes of knucklehead Sealy and twistup Inniss. Estwick won’t be in the opposition race cause he run out of gas (and water).

  25. Alvin Cummins Avatar
    Alvin Cummins

    No David,
    the last paragraph is more important…”The country’s per capita income, projected to be almost US$16,000 in 2016, is higher than that of most of its rating peers. That said, Barbados’ economy and the sovereign credit rating benefit from a low level of perceived corruption.

    The body of the article projects growth, although low, but growth never-the less. Prudent control of the foreign exchange outflows is the important factor. In a world where most countries; even the U.S.A. and Canada, expect growth in the vicinity of less than 2%, and most around 1%. Barbados cannot expect growth to be higher than these countries who we depend on for our growth.

  26. David Avatar
    David

    Here is what Ian Da Souza of the Barbados Republic Bank had to say about the economy in 2015.

    http://www.nationnews.com/nationnews/news/61757/banker-upbeat-about-economy

    Here is what Noel from Scotibank had to say late late year

    http://www.nationnews.com/nationnews/news/74997/economy-upswing-banker

    Although he kind of double back on his review of the economy earlier this year

    http://www.nationnews.com/nationnews/news/78161/bankers-fix-debt-improve-growth

  27. Tron Avatar
    Tron

    Here is my prediction how the local establishment will react:

    Prime: “Standard? Isn´t that a local supplier of appliances and furniture? If not, I dump the company to the rubbish bin”.

    MoF: “Not out of the woods, but my medicine from Venezuela and North Korea is working.”

    Inniss: “The local business is to be blamed.”

    The pastors in church: “We are still better off than 1937 or 1816. You can still grow your own vegetables in the garden – provided you have water at all, he, he, he.”

    First Caribbean, a bank based on Barbados treasury bonds aka financial bombs:
    “We do not understand the downgrade at all. It is sooooo unjust. We deserve sooo much better.”

    Dr. No from Central bank:
    “My personal rating for Barbados is at least AAAA. Trust me, buy Barbados treasury bonds.”

    Barbados Advocate:
    “An international conspiracy against Barbados and the black man. We still punch above our weight.”

  28. Due Diligence Avatar
    Due Diligence

    bajans September 24, 2016 at 12:02 PM

    Did you attend the Guv’s presentation in Ottawa?

    Did he receive an enthusiastic reception?

    Did you buy some of his bonds?

  29. David Avatar
    David

    @Alvin

    Sorry, you are correct, it is why we were downgraded.

  30. Gabriel Avatar
    Gabriel

    Perception will continue to dog this administration to its eventual demise.Rise up and vote,you 40% or forever accept your fate!

  31. Tron Avatar
    Tron

    @David

    After reading these statements I feel a bit like looking into the glass sphere.

    Low growth rate of 1 or 2 % works, if you pay 0 % interest for treasury bonds like USA, UK, Switzerland and Germany.

    Barbados on the other hand pays 10 %(!) on the latest CS loan.

    And again: The latest S&P downgrade increases the interest rate under the CS loan provisions AGAIN!!! The lawyer who drafted that contract is a genius, indeed.

    In other words: In August 2017 we will definitly face an increase of VAT by at least 2 %. Maybe some other fat tax and a doubling of taxes on importing cars too.

  32. David Avatar
    David

    Breaking down the report in bite sizes for some on the blog.

    The government did not lower its fiscal deficit as much as we had expected last year, and we expect slow progress in lowering the deficit over the next several years. The fiscal slippage reflects poor implementation of various adjustment measures, which only became effective during the second half of the last fiscal year, as well as failure to meet targets for state-owned enterprises (SOEs). The general government deficit was 6.1% of GDP in fiscal-year 2015 (from April 2015 to March 2016), slightly above the 5.8% of the prior year; the general government deficit includes the National Insurance Scheme (NIS) surplus of 1.2% of GDP. Stricter control over expenditure at SOEs, some one-off revenues from the sale of the Barbados National Terminal Company, and the full impact of the fiscal measures announced in 2015 and 2016, should reduce the fiscal deficit (and change in government debt) toward 5% of GDP during 2016-2018. The management of SOE finances poses a risk to the success of the fiscal consolidation of the government, in our view.

  33. Bush Tea Avatar
    Bush Tea

    @ Gabriel
    Rise up and vote….?
    Tron is right.
    There is no way out that does not involve much pain….
    …much more pain than ‘voting’…

  34. Due Diligence Avatar
    Due Diligence

    David

    Congratulations on your scoop of the S&P report

    Cann’t wait to see how Advocate, Nation and BT report on it.

    And of course how the PM, MOF and Guv respond.

  35. Watchman Avatar
    Watchman

    @ David

    very good , please send out offer to Walter PPK Blackman for comments

  36. millertheannunaki Avatar
    millertheannunaki

    @ Tron September 24, 2016 at 11:48 AM
    “Told you so.
    Low work ethic, too many Wambenzis, too many holiday for employees, too many ministers, judges, bureaucrats and pastors.
    Good bye old Bim! Hello Uganda!”

    All is required now is for Fumble (and his band of incompetent ‘don’t-blame-us’ goons) to announce by dictatorial decree that as January 20th 2017 Bim will be a full fledge banana republic with all monkeys of Bajan descent welcome to wuk-up with the great party of liars and scumbags before the SS Barbados go under like the Titanic.

    Frustrated Businessman has been warning you guys for a long time in coming. Not like the boy who cried wolf but like the boy on the burning deck while Stinkliar failed to keep in finger in the hole of the dyke.

    Look out for the New Republic of Barbados, the newest kid on the block for failing states. How much would it pay for a spliff of weed mixed with a joint of ‘Devaluation” grass? 5 to 1 or 10: 2?

  37. Pachamama Avatar
    Pachamama

    @ David

    The people we borrow from do not obey their own rules, the metrics are rigged.

    Monetary policies delivered endless cash and its equivalent to banks and shadow banks.

    Now that these policies no longer work, they are talking about fiscal policies.

    These metrics are only are only for helpless countries. The national debt keep growing and can never be repaid.

    Why do more of the same?

  38. ac Avatar
    ac

    What i cannot understand is the rallying cry for barbados to reduce a billion dollar in seven years. All well and good but should not there be a balance in doing so along with measures making sure that the social enviroment does not collapse .Isnt the health of the social enviroment equally as important as lowering the deficit.some how the emphasis on the defecit has overshadow what is an important issue to barbados survival and having not to be driven into a hell hole of total social collapse. Then the question remains how does these two issues balance each other out with the same emphasis that are crucial to barbados economic health and survival
    Clapping hands in vitriol is an exercise in foolishness.Going back to the drawing board which got barbados in its economic mess is not going to happen
    Therfore in the meanwhile outside of removing the burdensome weight of a high govt wage bill which would impact many households resulting in a faster lowering of the deficit S&P and other rating agencies would continue to ring the lowering of the defecit bell.
    Measures have been put in place. The long and short now comes down to keeping barbados from slipping into a social hell hole because of harsher measures which these financial instituitons insist must be a done .
    As in the last election the privatization gene would pop its head out of the bottle with all the right questions and the wrong answers answers that are crucial to maintaining the social enviroment of a nation giving answers that would serve one purpose eventually impacting most households that have relied on govt jobs for livelihoods

  39. David Avatar
    David

    @DD

    As you know the BU rumshop has a loyal following, we do try to keep the bar solid as moon rock.

  40. Well Well & Consequences Avatar
    Well Well & Consequences

    Would the jackasses at BWA go to Prospect Road up the hill where a burst pipe…the 3rd time on less than one year….is pouring hundreds of gallons of water down the hill onto Prospect Main Rd…people said they been calling BWA for a couple days and they refuse to turn up to stop the water wastage.

    There are people on the island who cannot get water.

  41. Well Well & Consequences Avatar
    Well Well & Consequences

    The useless ministers in parliament take taxpayer’s money to pay for these reports from Moody’s and S&P….when it’s not what they want to hear because they are incompetent, they get angry.

    They are spiraling further and further into the hole of their own creation.

    Do not turn your back on them…none can be trusted.

  42. millertheannunaki Avatar
    millertheannunaki

    @ Due Diligence September 24, 2016 at 12:59 PM
    “Congratulations on your scoop of the S&P report
    Cann’t wait to see how Advocate, Nation and BT report on it.
    And of course how the PM, MOF and Guv respond.”

    This is one piece of ‘damning’ paper that can’t be dispatched to the waste paper basket next to the coffin of a $5 million casket from the Downlowe Funeral Home of Good Riddance.

    A healthy level of foreign reserves is the elixir for the Bajan economy with FDI, remittances from the Diaspora and the fast disappearing pension payments to returning nationals being good nursemaids.

    But it seems the formerly fat patient called the Bajan economy has taken a turn for the worse and is about to go into a diabetic coma from excessively sweet living on conspicuous consumption.

    Should this patient go into further stasis of economic seizure, both Dr. Deliar Worthless and the Stinking Liar the out-to-sea sinker of the economy will have a lot to answer for.

    Who should the concerned family of worried Bajans call in for a lasting opinion? Dr. IMF, the lender of last resort?

  43. David Avatar
    David

    Any word on if the government has given the IMF approval to publish the Article IV report?

  44. millertheannunaki Avatar
    millertheannunaki

    @ Watchman September 24, 2016 at 1:12 PM
    “@ David very good , please send out offer to Walter PPK Blackman for comments”

    Watchie, do you think David is a modern-day Jesus? After you decapitated the poor fella for breaking his moral compass, do you expect David to miraculously perform a head transplant on PPK?

    You can’t expect to make a pact with the political devil of the DLP and still appear on BU as Blackie the Lionheart.

  45. Gabriel Avatar
    Gabriel

    David is right on the banks looking to shed liabilities by doing something this PM has not yet learned ,that is to cut expenditure and improve productivity without impairing the product.RBC has for sale their lower broad street office at a price of 12million.RBC is in the news again in the EC for applying a $25.- fee to customer accounts.
    Sagicor is smiling this time around in spite of the retard from sen Lucy whom they caused to be muzzled for almost 2 years.Its only a matter of time before other financial institutions message with their feet.

  46. Bernard Codrington. Avatar
    Bernard Codrington.

    @AC
    “defecit bell” ? These below the belt Freudian slips that you and Olde Baje using in this blog indicate utter frustration with these expert opinions.
    It is more important to admit we have a problem. Stop the blame game and let us work on a salvage strategy.
    I agree with you that the world is into a medium term low growth recession. This can impact Barbados but it does not determine that Barbados will have a lower rate of growth nor a higher rate of growth. Barbados rate of growth is dependent on the private sector investing in growth oriented activities and the Public sector not cutting areas that lead to long term growth and social stability. The latter point that you have made. Social stability is the most important input into the Inflow of Foreign Direct Investment,The Tourism industry and The Offshore Financial Sector.
    We may have to borrow or tax. Tax on lower incomes are already too high. So that is a no go . What about a wealth tax? Cutting expenditure on health and Education is a no go. What about cutting expenditure on public shows and celebrations and other nonproductive activities?

  47. Due Diligence Avatar
    Due Diligence

    Gabriel September 24, 2016 at 2:36 PM

    Back in 2014 RBC agreed to sell its troubled Jamaican business – to Sagicor

    http://business.financialpost.com/news/fp-street/royal-bank-of-canada-agrees-to-sell-jamaican-business-at-loss

    RBC could do the same with it Barbados business – if it can find a buyer

  48. David Avatar
    David

    So they have included Hyatt investment in the forex inflows BEFORE Town Planning approval? The implication is that Maloney’s company will enter the capital market? Who can explain?

    Within the last 12 months, three major hotels have announced new investments on the island–the Hyatt, the Sam Lord’s Castle project by Wyndham (which the China Exim Bank will finance as well), and the expansion of the all-inclusive Sandals hotel. This should boost FDI flows and finance around 80% of the projected CAD. Coupled with disbursements from multilateral organizations, this should ease the downward trend of the international reserves.

  49. pieceuhderockyeahright Avatar
    pieceuhderockyeahright

    @ Well Well and consequences

    “Would the jackasses at BWA go to Prospect Road up the hill where a burst pipe…”

    My colleague in arms against the doufuses of the century (The DLP) tomorrow is Sunday and that is 2 times the pay per hour it going get started at 12.01 am tomorrow morning and will finish in the night time

    @ Honourable Blogmaster

    Dat truck wid de loose files “wukking”

    Dem must hat you guts some more…heheheheh

    By the way you note that the Commissioner of Police ent finish he report on the Blackett attempted murder by the RPBF yet right??

    @ the General Public

    Send de files to BU when wunna want to at least get de DLP rankled.

    Prayerfully, the outcome will be some modicum and pretense at action

    Yeah right!!

    Just consider your exposees more “nails in the coffin of the DLP” for “there shall be no progress under Fumbles Fools”

  50. Due Diligence Avatar
    Due Diligence

    David September 24, 2016 at 3:16 PM

    Man you not just a glass half full guy – you seeing the glass 80% full.

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