Standard & Poor’s Lowers Credit Rating on Belize, Citing Politics
By the Caribbean Journal staff
Standard & Poor’s has lowered its long-term foreign and local currency sovereign credit ratings on Belize to CCC+ from B-, with its outlook “stable.”
The ratings firm pointed to an announcement by Prime Minister Dean Barrow placing continued debt service of the country’s $546.8 million bond (locally called the “superbond”) as an election issue.
“The nature of the statement, and prominent public office of the speaker signals, from a credit perspective, lower predictability that the government will continue to service its external commercial debt,” the rating decision said.
“The downgrade reflects signs of lower political willingness to service Belize’s external commercial debt obligations,” said Kelli Bissett, credit analyst for Standard & Poor’s. “In addition, Belize faces external imbalances, limited access to external funding and rising costs of servicing general debt.”
“Although a future United Democratic Party (UDP) government could ultimately back away from its leader’s campaign rhetoric, the injection of the superbond into the campaign follows increased policy unpredictability (including the nationalizations of Belize’s main electricity and telecom companies in the last two years),” it said.
Standard and Poor’s also pointed to what it said was low economic growth, a weak investment outlook, increased levels of crime and limited ability to raise government revenue, “all of which, from a credit perspective, weaken the government’s payment capacity.”
S&P also said Belize’s current account was weakening, and that oil production, the government’s most important foreign exchange earner, was in “structural decline.”
The decision to call Belize’s outlook stable “balanced the possibility that the government would seek debt relief to reduce a rising external interest burden” against the possibility that debt management would improve after the election.
The firm said it could lower its rating if there were increased signs that the government intended to pursue a distressed restructuring, or if external liquidity pressures were to emerge.
“An upgrade would most likely result from greater predictability about the political willingness to service debt and improved financing prospects,” it said. “These would likely stem from an improved growth and investment outlook.”
