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Moody’s warning of debt default in Belize, Grenada and Jamaica
“At the moment, we see a high probability that Belize and Jamaica will relapse into default,” Moody’s said, adding that said some countries, such as Trinidad & Tobago and Suriname, are more economically stable than others.
It noted that Jamaica has a debt-to-Gross Domestic Product (GDP) ratio of more 100 percent, while the Cayman Islands and Bermuda have ratios of 23 per cent and 28 per cent, respectively.
Referring to International Monetary Fund (IMF) data, Moody’s said most small Caribbean states have debts-to-GDP ratios of more than 70 percent and a current account deficit of 23 percent.
The credit ratings agency said the “policy toolkit for reducing debt in the Caribbean is limited”, adding that many countries cannot devalue their currency because exchange rates are usually fixed or managed. In light of big budget deficits, Moody’s said many Caribbean countries are unable to stimulate growth through spending and investments.
“The lack of options has left debt restructuring as an attractive tool to reduce public sector debt,” said Edward Al-Hussainy, the report’s author and a Moody’s senior analyst.
“As new restructurings unfold, we expect governments to be more aggressive in seeking principal haircuts to achieve lower debt loads,” he added.
The report noted that the region has also been adversely affected by extreme weather that has often resulted in humanitarian and economic woes, stating that the adverse conditions range from small storms and floods that cause some damage, to hurricanes that ravage some of the territories.
The IMF said that since the early 1960s, the Caribbean has experienced losses equivalent to almost 1 percent of GDP on average in weather damages annually. -(CMC)
