Above: Kingston

By the Caribbean Journal staff

Standard & Poor’s this week raised the short-term sovereign credit rating on Jamaica to “B” from “C.”

The ratings firm also affirmed its “B-” long-term foreign and local currency ratings, along with holding the country’s outlook at “negative.”

S&P said the increase in short-term rating was a result of the revision in criteria on the linkage between long-term and short-term ratings for sovereigns, according to Standard & Poor’s credit analyst Joydeep Mukherji.

The ratings lift thus did “not reflect a change in Jamaica’s short-term credit prospects, it said.

“Jamaica’s narrow economic structure, large informal sector, and persistent fiscal and external deficits, which have led to heavy debt-service burdens, constrain our ratings on the country,” the firm said.

Jamaica’s general government debt could exceed 130 percent of GDP in the fiscal year 2012/2013, with a public sector deficit exceeding the government’s target of 4.5 percent of GDP.

According to S&P, Jamaica’s international reserves will be able to cover “just over three months of current account payments as of the end of 2012.”

“We expect GDP growth will remain low this year, likely about 1 percent,” S&P said. “In addition, the lack of a new agreement with the International Monetary Fund has sustained uncertainty about economic policies, detracting from Jamaica’s creditworthiness.”

The firm did say that Jamaica’s “stable democratic government” and its “success in financing a large share of its borrowing needs in the domestic capital markets” supported the ratings.

The negative outlook reflected what S&P called its view of the “likelihood of a downgrade” if Jamaica fails to increase its primary surplus and meet other requirements necessary to receive IMF funding.

“Our view is that the government’s room for fiscal maneuvering is narrowing,” the firm said. “If the government fails to stabilize both the external and fiscal accounts, we would likely lower the rating.”

If it improved its fiscal stance with a credible economic plan, however, Jamaica’s creditworthiness could improve.