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Apr 18, 2017

Moody’s gives Belize and Superbond thumbs up

Belize is buckling down to the business of paying off Superbond three point oh with interest payments resuming on a semi-annual basis subject to conditions until 2030 when the first of five soft bullets kicks in. This week, Moody’s Investors’ Service gave its thumbs up to the Government’s plans for the Superbond with a series of upgrades to currency ratings and rating the economic outlook as stable, which means rating changes are unlikely in the near future. However, it does share concerns. It said the economy’s performance has fallen “far short of the growth path envisaged by official projections in 2012-13 at the time of the previous restructuring negotiations”. Moody’s estimates that real G.D.P. contracted one point five per cent in 2016, that the fiscal deficit remained high at around five per cent of G.D.P. and that central government debt reached ninety-one per cent of G.D.P. Given Belize’s low potential growth (one point five to two per cent), Moody’s said a debt burden above ninety per cent of G.D.P. (quote) severely constrains the authorities’ room for policy maneuver and limits the economy’s ability to absorb shocks (unquote). According to news reports, Moody’s said the key drivers of the upgrade of Belize’s senior unsecured and long-term issuer ratings are the improvement in the government’s debt service profile and reduction in the risk of a subsequent credit event, following the recent restructuring of the government’s debt. The rating agency said, (quote) lingering macroeconomic and fiscal vulnerabilities and risks to debt sustainability, which constrain Belize’s creditworthiness within the low ‘B’ category,” is also a key driver of the upgrade…The stable outlook reflects the balanced risks to Belize’s credit profile at the B3 rating level…The risk of a subsequent credit event remains low through the outlook horizon, given the government’s more favorable debt payment schedule. (Unquote.) Moody’s also said that fiscal and economic challenges are likely to persist, adding that it believes that, despite the liquidity relief provided by the debt restructuring, quote, “there is a low likelihood that upward pressure on Belize’s creditworthiness will develop over the next 12 to 18 months”, unquote. Thus, Belize’s long-term foreign- and local-currency issuer and senior unsecured ratings rose to B3 from Caa2. Meanwhile, Moody’s has also raised Belize’s long-term foreign-currency bond ceiling to B1 from B2, and the long-term foreign-currency bank deposit ceiling to Caa1 from Caa3.

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