Was Standard and Poor’s downgrade justifiable?

Was Standard and Poor’s downgrade justifiable? (Topic from the Observer)

The decision by Standard & Poor’s (S&P) to downgrade Jamaica’s long-term foreign and domestic currency ratings from CCC+ to CCC, apparently on news of the dismissal of Bank of Jamaica Governor Derick Latibeaudiere, prompted the Government to dismiss the rating agency’s reaction as premature at best.

But Oppenheimer’s Dr Carl Ross believes the administration did not go far enough in assuring that it would improve its ability to service its debt in the near term, or perhaps more importantly, unequivocally rule out some variance of a debt restructuring factoring in an International Monetary Fund (IMF) agreement.

Latibeaudiere. hawkish, nationalistic, proud Jamaican policymaker
“As a result, we are seeing pressure on Jamaican bonds this morning, since the market’s perception of the probability of default has increased significantly,” said Ross.

Ross stated that he believes “the IMF talks are proceeding and that an agreement will be signed in December or January that does not include a debt restructuring. It is more likely to include a promise by the Jamaican Government to engineer a significant reform of the public finances (tax reform, public sector administrative reform, reform of tax concessions, etc). Embedded in that programme will be a fiscal deficit path. Due to the weak economy and based on past experience, I think there is a high likelihood that Jamaica misses its quantitative and qualitative targets relatively early in the programme. If this were to happen, I believe the likelihood of the IMF requiring a debt restructuring as a condition of re-working the programme would rise significantly.”

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Posted by Friends on Nov 23 2009 Filed under Local, News, Uncategorized. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.