One-notch lowering of TT Government’s ratings driven by general deterioration in key credit metrics

Credit rating agency, CariCris has downgraded the sovereign issuer ratings of Trinidad and Tobago (TT) by one notch to CariAA (foreign and local currency ratings) but with a stable outlook.

Caricris said the one-notch lowering of the Government’s ratings was driven by a general deterioration in key credit metrics of the sovereign over the past five years from when its rating of Trinidad was last adjusted. CariCris also assigned a stable outlook on the ratings.

CariCris noted, “Increased fiscal spending in response to COVID 19 in 2020 and 2021 is being financed through a combination of external debt (bond issues, multilateral agencies and bilateral partners), local debt through commercial banks and drawdowns from TT’s sovereign wealth fund, the Heritage & Stabilisation Fund (HSF).”

Containing debt accumulation

The rating agency said the use of the US$5.6 billion HSF, “Is prescribed for such situations as currently being faced and helps to contain the accumulation of debt.”

CariCris also identified a number of TT’s key strengths including satisfactory financial sector, monetary and exchange rate conditions.

This is in addition to the comfortable debt service coverage when compared to its regional peers; robustness in TT’s sovereign wealth fund despite drawdowns for budgetary support; anticipated improvement in fiscal balances as COVID-19 impacts draw to a close given; vaccinations domestically and globally, along with some positive tax and expenditure measures.

The ratings agency also pointed to the country’s comfortable debt service coverage relative to its regional peers; a slower rate of GDP decline expected in 2021 and a return to growth in 2022; continued financial sector soundness and strength in international reserves and import cover.

Finance Minister, Colm Imbert says although the country’s debt level has indeed increased, the Government took the appropriate decisions, in the short and long-term interest of the population.

“We have taken note of the decision by CariCris to keep TT well into investment-grade territory, although reducing our rating by one notch because of our active use of fiscal policy to soften the COVID-related blow to the economy,” Imbert said in a release.

He said the rating agency has put a stable outlook to the rating of Trinidad, adding that this shows that CariCris believes in T&T’s determination to bring its public finances under control.