Caricris reaffirms TT govt 'high creditworthiness' rating

Regional financial services agency Caricris has reaffirmed Government’s high creditworthiness rating. The country scored CariAA+ (Regional Scale Foreign Currency); CariAA+ (Regional Scale Local Currency) and ttAAA (Trinidad and Tobago National Scale).

The ratings are based on Government’s US$500 million debt issue. “These ratings indicate that the level of creditworthiness of this notional obligation, adjudged in relation to other obligations in the Caribbean, is high,” Caricris said in a statement.

The firm also revised the outlook on the ratings to negative from stable.

The factors supporting the reaffirmation of TT’s ratings include the country’s position as one of the largest and most diversified in the Caribbean, which provides a level of resilience in economic performance during difficult times. The financial system continues to be well-regulated with relatively stable monetary conditions and exchange rate performance; and there remains a comfortable debt service coverage when compared other Caribbean islands despite some deterioration.

Strengths are tempered by factors including continuing balance of payment deficits due to softer commodity prices in recent times; a significant fiscal deficit projected for 2020 despite good fiscal restraint shown over the past three years; persistent social instability, worsened by rising unemployment and crime; and the continued lack of reliable macroeconomic data, which hampers efforts to improve revenue collection and strengthen the economy.

The change in outlook from negative to stable was based on uncertainty of a return to sufficient economic growth in 2021 and over the medium-term, Caricris said.

It noted that the covid19 pandemic brought a sudden stop to domestic activity in the first quarter of 2020 and necessitated an increase in government spending and borrowings. The pandemic also in part caused a collapse in energy prices. Downside risks to economic recovery in 2021 and a reversal of covid19’s other macroeconomic impacts over the medium-term include a slow and prolonged rate of recovery internationally with negative implications for energy prices; weakness in demand from regional markets; and a second wave of virus transmission.

Factors that could lead to an improvement in the outlook and rating include a decrease in the total public sector debt to below 65 per cent of GDP; an improvement in debt servicing capability to above seven times; a fiscal surplus in excess of three per cent of GDP sustained over 2 consecutive years; a rise in the import cover to 12 months or more.

Factors that could lead to a lower rating or outlook include an increase in the total public sector debt to above 86 per cent of GDP over the next 12 months; a sustained deterioration in debt servicing capability to below four times over two consecutive years; a fiscal deficit in excess of eight per cent of GDP sustained over two consecutive years; and fall in the import cover to 6 months or less over the next 12 months.