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Dr.Dudd
11-19-2009, 09:56 AM
Another downgrade hits Jamaica
Published: Thursday | November 19, 2009


Daraine Luton, Senior Staff Reporter
Claiming Jamaica appears close to defaulting on its debts, ratings agency Moody's Investors has downgraded the country's local and foreign currency bonds from B2 to Caa1 with a negative outlook.

Yesterday, Moody's said delays in reaching an agreement with the International Monetary Fund (IMF) factored in the downgrade.

"After several months of negotiations with the IMF and the various statements indicating progress, there are signs that an agreement with the IMF may not be within reach yet," the ratings agency noted.

Alessandra Alecci, vice-president and senior analyst at Moody's, said the IMF agreement was crucial to "maintain confidence, meet this year's government funding needs and provide foreign currency inflows to sustain the external position".

The Moody's markdown follows on the heels of Standard and Poor's (S&P) downgrade of Jamaica's bonds to triple C with a negative outlook two weeks ago.

A 'CCC' rating signals that the ratings agency sees the debt issuer as 'vulnerable', and is an alert to investors that there could be interruption in servicing of the debt.

Moody's judges obligations rated Caa1 as of "poor standing and are subject to very high credit risk".

Imf talks going well

Finance Minister Audley Audley Shaw, in seeking to reassure the country and the international community, continued to say discussions with the IMF were going well.

"The Government continues to be in fulsome discussions with the IMF and we are confident that we will shortly be able to make the proper announcement, as indicated by the prime minister in his speech on Sunday," said Shaw.

On Sunday, Prime Minister Bruce Golding said the agreement might be in place by Christmas.

"We are actively in the process of preparing the formal letter of intent that will go forward to the IMF. This is a formal application, which pins down all of the critical features of the agreement."

According to the minister, he would not attack Moody's the way he did S&P. However, the latest downgrade was still on the wrong track.

"Admittedly, Moody's did not follow the trend of Standard and Poor's when they had done the downgrade, but I think Moody's has expressed a concern about the IMF agreement and they have also a concern about the issue of debt management, and the truth is that the government is dealing with both," said Shaw.

The finance minister had said S&P's downgrade of Jamaica's bonds was hasty and unwarranted.

However, Opposition Spokesman on Industry and Commerce Mark Golding said he hoped Government took Moody's downgrade seriously.

"This really indicates that the country is in an extremely precarious position in terms of public financing," Golding told The Gleaner.

He added: "It shows that the Government's castigation of Standards and Poor's was just a misguided case of shooting the messenger instead of heeding the message, as Moody's have downgraded us on similar grounds," Golding said.

Moody's said Government's options to restore debt substantially without a debt restructuring are narrowing, despite the strong resolve of the authorities to avoid a rescheduling.

The finance minister had said he was hopeful to have had IMF assistance by September. However, Government has not been able to meet that target.

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