A residential area in Trinidad and Tobago's capital city of Port of Spain (Photo: World Nomads courtesy iStock/jaysunlp)

Trinidad gets one notch downgrade from CariCris

A residential area in Trinidad and Tobago's capital city of Port of Spain (Photo: World Nomads courtesy iStock/jaysunlp)

Trinidad and Tobago (T&T has received a rating downgrade from regional credit rating agency, CariCris.

CariCris, in its latest credit assessment of the country, downgraded the twin island republic’s sovereign issuer rating by one notch to CariAA (foreign and local currency ratings) but with a stable outlook.

The one-notch lowering of the Government’s ratings was driven by a general deterioration in key credit metrics of the sovereign over the past five years from when the rating of Trinidad and Tobago was last adjusted. However, CariCris has assigned a stable outlook on the country’s economic prospects.

Anguilla Rating Rationale October 2013

In its assessment CariCris noted, “Increased fiscal spending in response to COVID 19 in 2020 and 2021 is being financed through a combination of external debt (bond issues, multilateral agencies and bilateral partners), local debt through commercial banks and drawdowns from T&T’s sovereign wealth fund, the Heritage & Stabilization Fund (HSF).”

The rating agency said the use of the US$5.6 billion HSF “is prescribed for such situations as currently being faced and helps to contain the accumulation of debt.”

CariCris identified a number of T&T’s key economic strengths including satisfactory financial sector, monetary and exchange rate conditions. This is in addition to the comfortable debt service coverage when compared to its regional peers; robustness in TT’s sovereign wealth fund despite drawdowns for budgetary support.

Signage for Central Bank of Trinidad and Tobago (Photo: Pride News Magazine)

Also, the twin-island republic scored positive on the anticipated improvement in fiscal balances, as COVID-19 impacts draw to a close, given vaccinations domestically and globally, along with some positive tax and expenditure measures. The ratings agency also pointed to the country’s comfortable debt service coverage relative to its regional peers; a slower rate of GDP decline expected in 2021 and a return to growth in 2022; continued financial sector soundness and strength in international reserves and import cover.

Commenting on the credit rating Trinidad and Tobago’s Finance Minister Colm Imbert highlighted that although the country’s debt level has indeed increased, the Government took the appropriate decisions, in the short- and long-term interest of the population.

Trinidad and Tobago’s Finance Minister Colm Imbert (File photo)

“We have taken note of the decision by Caricris to keep T&T well into investment grade territory, although reducing our rating by one notch because of our active use of fiscal policy to soften the COVID-related blow to the economy,” Imbert said in a news release.

He mentioned that the rating agency has put a stable outlook to the rating, which he argued shows that CariCris believes in the twin-island republic’s determination to bring its public finances under control.