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Grenada default elevates risk of spilling over into other Eastern Caribbean Currency Union states – Moody’s
A major international credit rating agency says the liquidity crisis leading to Grenada default on its US and Eastern Caribbean (EC) dollar bonds is “credit negative” for the country and elevates the risk of distress spilling over to member countries in the Eastern Caribbean Currency Union.
The newly-elected Keith Mitchell administration in Grenada said it would default on the bonds due 2025 because it is unable to secure financing to make a coupon payment on Friday.
The Wall Street-based Moody’s Investors Service said Grenada’s default has “systemic implications for the Eastern Caribbean Currency Union through two channels, financial and institutional”.
It said Grenada’s default will elevate short term financing costs for its peers that issue local currency (EC dollar) bonds and treasury bills on the Eastern Caribbean Currency Union’s Regional Government Securities Market (RGSM).
Moody’s said sovereign defaults have also weakened the balance sheets of banks and institutional bondholders in the region.
On institutional, it said pre-emptive debt restructuring, primarily targeting external, foreign currency bonds “has become a more acceptable option for policymakers in the region, indicating a diminished willingness to service sovereign debt”.
Moody’s said the default is Grenada’s second since 2004, mirroring wider distress in the Eastern Caribbean Currency Union.
