BDS | Nov 7, 2020

S&P maintains Barbados’ long and short term credit rating

/ Our Today

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Ratings agency lauds Barbados post-COVID economic performance

 By Durrant Pate

The internationally renowned ratings agency, Standard & Poor’s (S&P) has maintained Barbados’ long- and short-term credit ratings.

Following its recent assessment, S&P has maintain Barbados’ B-/B ratings for both its long- and short-term credit with a stable outlook for the Bajan economy. An official statement from the Office of the Prime Minister attributed S&P’s positive credit rating largely to the success of the Barbados Economic Recovery and Transformation (BERT) programme.

In December last year, S&P upgraded Barbados’ foreign currency ratings six notches from SD (Selective Default) to B-/B, after the Mia Mottley Government completed its local and external debt restructuring. At that time, S&P had also assigned a ‘B-’ foreign currency issue rating to the foreign currency debt delivered in the exchange.

“The stable outlook reflects our view that the COVID-19 pandemic will have a significant impact on Barbados’ economy and that the recovery will be more subdued than anticipated… .”

Standard & Poor’s

However, in its latest assessment of the country’s credit worthiness, which was released on Thursday (November 9) , the New York- based ratings agency highlighted that Barbados’ economic performance was considered a key factor in its assessment. The ratings agency underscored the point that the positive performance of the Bajan economy has allowed the country to weather the economic impact from the devastating effects of the COVID-19 pandemic.

According to S&P, “the stable outlook reflects our view that the COVID-19 pandemic will have a significant impact on Barbados’ economy and that the recovery will be more subdued than anticipated… . However, the progress and credibility that the Government has built over the past two years under the International Monetary Fund’s Extended Fund Facility (EFF) programme will facilitate access to multilateral financing and support growth in foreign exchange reserves.”

The ratings agency, while cautioning that the impact of the pandemic would worsen fiscal and external balances, pointed out that the debt restructuring completed last year and financing from multilateral institutions would help to limit Barbados’ near-term payment risks. S&P noted that international reserve levels would sustain external liquidity despite a higher current account deficit expected in 2020.

Illustration: Tradimo News

S&P said it projects a significant decline in economic growth for Barbados this year, due to the impact of the global health pandemic, citing a more prolonged tourism recovery period than was anticipated back in April. This is largely due to the fact that key source markets continue to face second waves of COVID-19 cases.

Based on the current IMF programme, Barbados was initially aiming for a six per cent primary surplus by the end of the current fiscal year. However, following the pandemic, the Mia Mottley administration has successfully negotiated a revision of that target and will now aim for a -1 per cent primary balance.


In its press statement announcing its assessment, S&P made the point that the Barbados Economic Recovery Transformation (BERT) programme had supported Barbados’ fiscal and external position entering into the pandemic, which will facilitate its ability to weather the economic impact. In its rationale for maintaining a steady rating, S&P reiterated its caution about the negative impact that COVID 19 will continue to have on the economy.

“As the global spread of COVID-19 continues, we expect continued weakness in Barbados’ economic activity and increased budgetary stresses. Higher case counts in key source markets, coupled with uncertainty surrounding the availability of vaccine treatments have led to a slower-than-expected recovery in tourism, which is a major contributor to gross domestic product (GDP). Due to this, we believe an economic recovery will take longer than we expected in April 2020,” the ratings agency said

Despite the challenges, S&P cited reasons for optimism saying it expects Barbados’ international reserves, coupled with policy-based funding to ease external pressures and provide financing to service debt payments for the next year.


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