Decline of TT global credit rating status

THE EDITOR: Rating agencies provide global investors with information on the ability of corporations and countries to pay back debt.

For example, how likely they are to make interest payments on time, or to default.

The three main global credit rating agencies are Standard and Poor’s (S&P), Moody’s and Fitch Ratings. Being downgraded can have a big impact on a country’s ability to borrow money on the markets and investors see it as a riskier bet and demand higher returns to lend to governments.

As our credit rating declines, for an ordinary person it means paying more interest, leaving little money for savings and expenditure on basic survival items such as food, housing, medicine, not to mention education and transport costs. This is because governments need to allocate more of our national income for interest payments on our loans.

Less money would therefore be available for social works, development priorities, creating jobs and, ultimately, reducing the GDP growth potential of the country as we have been seeing in TT over the past two years.

More interest payment also crowds out other critical public spending such as CDAP and basic healthcare. We would therefore be forced to borrow more, leading to a vicious cycle.

Basically with every downgrade investors see more risk and governments are left with fewer options to rescue the economy.

On April 27, S&P Global Ratings revised its outlook on TT to BBB+ negative from stable due to large macroeconomic risks and increases in external imbalances following an estimated seven per cent contraction in real GDP over the past two years.

S&P advised that, based on all indicators, the country would see exchange rate pressure, restrictions on accessing foreign currency, negative yield differentials on short-term treasury securities (relative to those of the US) and a faster depletion of the country’s external assets.

A cause for concern is that the negative outlook reflects S&P’s view that there is at least a one-in-three chance that it could lower the ratings over the next 12 to 24 months if Government’s borrowings increase and no improvement is made in its large revenue collection leakages and the economy’s reliance on a fast depleting gas supply.

Here is the timeline of the economic disaster:

• In December 2015 our S&P rating was A with a negative outlook.

• In 2016 our S&P rating went to A- with a negative outlook while our Moody’s went from Baa2 to Baa3.

• In 2017 our S&P rating dropped dramatically to BBB+ stable while Moody’s Investors Service (Moody’s) downgraded TT’s issuer and senior unsecured debt ratings from Baa3 to Ba1 – junk grade status.

• In 2018 our S&P has moved from BBB+ stable to BBB+ negative outlook. Moody remains, at May 1, junk grade status of Ba1. NGC, our most profitable energy company, is also credit rated at Ba1 by Moody’s, junk status (non- investment grade).

The UNC National Women’s Arm must ask the Government: What’s next?

MARISA VIDYA
RAMLOGAN, PRO, UNC National Women’s Arm