Barbados Sees Eighth Credit Rating Upgrade as Testimony to Economic Reform Success

Central Bank Governor Dr Kevin Greenidge says the latest credit rating upgrade from Fitch is clear evidence that Barbados’ economic reform programme is working.

That makes it eight credit rating upgrades since 2018 and he is hoping more could be around the corner, following discussions with another leading credit rating agency Standard & Poor’s (S& P) and upcoming talks with Trinidad and Tobago-based Caribbean Information and Credit Rating Services (CariCRIS).

Greenidge spoke yesterday as economist Jeremy Stephen called the Fitch ratings upgrade “rather significant in terms of the signal that is being sent to investors that there is a consistent stabilisation” of Barbados’ fiscal and economic situation.

With Fitch raising Barbados’ credit rating from ‘B’ to ‘B+’, they both said that a return to an investment grade rating would be a stepby-step process. “This is very welcome news because it is a demonstration of the work that we have continued to accomplish under the Barbados Economic Recovery and Transformation (BERT) programmes,” Greenidge said.

“Fitch mentioned that the upgrade reflects the strong fiscal performance. As you know, the Government has been achieving strong primary surpluses which is consistent with lowering the debt to GDP (gross domestic product) ratio. They also mentioned that strong governance and robust levels of reserves also contributed to the upgrade.”

The Governor called this “extremely good because this is the eighth upgrade since we started the BERT programme in 2018”.

“We had upgrades from all of the other rating agencies and so it is really saying to the international community that Barbados continues to do well, continues to make progress on the economic front and that this is a place where you can put your money,” he said.

“They mentioned that challenges remain, especially our vulnerability to external shocks. My view is that you have to work on getting growth and building resilience in order to be able to weather these shocks. As we continue to do so, I believe we will continue to get further upgrades.”

Stephen, a former banking and finance lecturer at the University of the West Indies, said the hope is that this latest upgrade and others will lead to an “influx of confidence” for Barbados.

“The fundamental things that they are saying is that the Government is the issue. It’s not a case where the private sector on its own is endemic, but rather a lot of the policies by Government and the

fact that we depend overall on tourism as an industry,” he explained.

“It shows that there are headline risks that Government has to be careful about, but they are willing to upgrade the Government even further if they can maintain primary surpluses.”

Stephen said this means that the Government “will have to still suppress a lot of the fiscal expenditure it should do or be a little more targeted . . . in certain areas”.

The major task ahead of Barbados now will be to get an investment grade rating and Greenidge said “we are making strides towards that”.

“Remember we had about 19 downgrades since 2008, so if you come back up eight you have still got a long way to go, but it is not going to happen overnight. In fact, in my view if we had not lost the one and a half years during COVID and the year or so of debt restructuring, we probably would have been much further ahead,” the Governor noted.

“But we are getting there and we will continue to stay on the path and continue to invest to get the economic growth we need, continue to build resilience and continue to keep the debt on a downward trajectory. Then I believe we will see the upgrades.”

He reported “very positive” recent discussions with S& P.

“I don’t want to predict what they will do but I think we had very good and robust discussions and I would not be surprised if things turned out to be similar to Fitch, but let’s wait and see on that. In early November, we are going to engage with CariCRIS, the regional credit rating agency. We have had 14 consecutive quarters of growth so you are going to see it being reflected,” Greenidge said.

Stephen said the fact that Barbados’ credit rating remains speculative or ‘junk’ “is not necessarily a cause for concern”.

“There is nothing much that you can do about it rather than just chip away at a lot of the idiosyncrasies and inefficiencies that rendered us junk in the first place.” (SC)