Above: Parliament in Belmopan
By the Caribbean Journal staff
New York-based Moody’s has upgraded the credit rating on Belize’s government bonds, the firm announced Monday.
The rating has been lifted to Caa2 from Ca, with a “stable” outlook.
The move comes after Belize restructured its $547 million “Superbond,” which is due in 2029. That included what became Belize’s second default in the last seven years.
But while Moody’s said the restructuring would provide “temporary liquidity relief,” it is “insufficient in addressing Belize’s debt overhang.”
Looking forward, a number of structural factors will keep the government’s rating in the Caa space for the next two to four years, the firm said, pointing to Belize’s track record of two defaults in seven years, something that “signals a weak institutional willingness and ability to service external debt.”
The country’s government debt remains at around 70 percent of GDP, which, coupled with “limited fiscal and foreign exchange buffers impairs the outlook for economic growth post-restructuring.”
That leaves Belize “vulnerable to shocks that could lead to an abrupt decrease in government creditworthiness.”
“There is a potential for an escalation of credit risks in the coming years. In our opinion, the government will find it progressively more difficult to maintain fiscal discipline as demand ratchets up for increased public sector wage hikes, social transfers, and capital investment,” the firm said. “Also, the debt service on the US dollar bond will escalate due to an increase in the coupon rate in 2017 and amortization payments that are set to start in 2019. Faced with rising financing needs, a pre-emptive debt restructuring could once again become an attractive alternative for policymakers, particularly in 2017, the year the next general election is set to take place.”