Standard & Poor’s lowers Belize’s ratings
Standard & Poor’s Ratings Services today announced that is has lowered Belize’s long-term foreign currency sovereign credit rating to “CCC” from a “B-“. While the sovereign ratings on the short-term foreign and local currency remained at “C”, S&P also downgraded the country’s long-term local rating to “CCC+”, a drop from “B”. And according to a release from S&P, the outlook on the ratings remains negative. Standard & Poor’s credit analyst Olga Kalinina says the downgrades and negative outlook reflect mounting liquidity pressures that are exacerbated by Belize’s impaired ability to access external financing (both official and commercial) and the government’s worsening debt trajectory. S&P says Belize’s financing gap is estimated at five hundred and four million U.S. dollars, or five hundred and sixty percent of usable reserves for 2005.
Kalinina’s analysis notes that G.O.B.’s rising debt has been difficult to reverse due to persistent fiscal slippages including the recent assumption of the Development Finance Corporation’s debt due to the bank’s financial collapse. External risk is further worsened by rising oil prices, imminent price cuts for sugar and banana exports, and inherent vulnerability to weather-related disasters. S&P further states that the negative outlook reflects the increasing risk of default, given Belize’s tight external liquidity position and persistent difficulties in securing much needed financing. S&P believes that while liquidity pressures may subside over the next two years, the massive debt burden will limit Belize’s creditworthiness. Kalinina warns that quote: “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.” End quote. She ended her statement by saying that “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, thereby restoring the confidence of the financial markets, the outlook may be revised to stable.”
News Five was unable to get a reaction from the Central Bank today, but late this evening the Ministry of Finance issued a response to the downgrading. The ministry says G.O.B. has been making, quote, “concerted efforts to consolidate its fiscal and debt position in order to strengthen the country’s official reserve position.” It cited the recent tax and expenditure measures approved under the new budget and recent increases in the Central Bank’s reserve requirements. The Ministry also pointed out that the country level financing gap referred to in the release is in respect to Balance of Payments account and should not be confused with the financing gap on Central Government’s Fiscal Accounts.
