Above: Kingston (CJ Photo)

By the Caribbean Journal staff

Fitch has raised Jamaica’s local and foreign currency default ratings to “CCC” from “RD,” the New York-based firm announced Friday.

The “CCC” rating implies that default is a “real possibility,” however.

The upgrade of Jamaica’s rating reflects several factors, including the material completion of the country’s National Debt Exchange, with a 98 percent participation rate.

Fitch said the NDX constituted a “DDE,” or “Distressed Debt Exchange,” as it “adversely impacted the original contractual terms of domestic bondholders.”

Fitch said the completion of the NDX represented “further progress” towards the implementation of an Extended Fund Facility with the International Monetary Fund.

“Fitch believes that IMF support is critical to stabilize investor confidence, support the balance of payments and reduce the sovereign’s present financing constraints,” it said in a statement. “Implementation risks will remain for Jamaica even if it gets access to the IMF facility given its past erratic record on meeting targets set under previous IMF programs.”

It said the main factors that could lead to a positive rating action are “sustained easing of external financing constraints and clear signs of a restoration in investor confidence” and “improved growth performance, fiscal consolidation and a declining debt trajectory.”

“Fitch considers that an IMF program is necessary for Jamaica to avoid destabilizing macroeconomic and fiscal pressures by restoring domestic confidence and providing access to foreign exchange funding,” it said.