Belize Gets Downgraded by Standard and Poor’s Global Ratings

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Updated: November 15, 2016

It is no secret that Belize’s economy has seen a downward trend in its growth performance and that austerity measures announced earlier by Government will create some challenges in both the private and public sectors.  But, there is more to Belize’s economic performance than just the local effects.  Just yesterday Standard and Poors lowered Belize’s long term foreign and local currency sovereign ratings from a B-minus to CCC+ while the rating for the short term foreign and local currency sovereign credit rating went from a B to a C.  The current situation that Belize faces is the result of several factors including the loss of correspondent banking relations, the BTL arbitration award as well as the high expenses in public workers ‘salaries.  According to the report, the reason for the downgrade is due to Belize’s inability to meet its financial obligations after becoming impaired by fiscal and external imbalances, limited access to external funding, reduced foreign exchange reserves, and the loss of correspondent banking relationships (CBRs). In the report’s outlook for Belize it noted, quote, “Although risks to political stability will remain low in the coming four years, we find Belize’s governmental institutions weak. Prime Minister Dean Barrow, of the centre-right United Democratic Party, is serving his third and final five-year term (2015-2020). We expect the government to continue to move slowly on fiscal and other policy adjustments, given adverse economic circumstances. The country’s recent history of debt restructurings continues to negatively affect our ratings. We expect net general government debt to rise to 81% of GDP this year, up from 76% in 2015. This heavy debt burden is a credit constraint, particularly given Belize’s narrow, open economy and fixed exchange regime. Interest payments currently stand at 9% of general government revenue, but we project they will rise toward 13.5% in 2019. Government debt servicing will increase in August 2017 as the coupon rate for Belize’s external bond due in 2038 (US$526.5 million at end-2015) rises to 6.767% from 5%, and it will again rise in August 2019 as principal payments start to come due.”  End of quote.  Standard and Poors Global ratings does its analysis with five factors in mind, namely, institutional assessment, economic assessment, external assessment, the average of fiscal flexibility and performance and debt burden as well as monetary assessment.