By Lara Holmes

One of the leading international credit rating agencies has downgraded Belize’s credit status a notch deeper into junk territory, despite giving an improved outlook on the economy.

The Wall Street-based Standard & Poor's Ratings Services said on Monday that it downgraded the Caribbean Community member-nation’s status after Prime Minister Dean Barrow signaled less political will to service the country’s large debt.

 

The nature of the statement and prominent public office of the speaker signals, from a credit perspective, lower predictability that the government will continue to service its external commercial debt, said S&P in its report.

 

S&P gave Belize a triple-C-plus rating, seven steps below investment grade.

But the agency described the country’s economic outlook as stable, and suggested that the Central American nation’s debt management may improve after Belize’s forthcoming general elections.

The stable outlook balances the possibility that the government will seek debt relief to reduce a rising external interest burden against the possibility that debt management will improve after the election, S&P’s report said.

Standard & Poor’s said it was concerned after Barrow raised, as an election issue, the government's 546.8 million-US-dollar bond. The agency said that because of this, servicing the debt is unpredictable.

In November, the rating agency revised Belize’s economic outlook to negative, based on the government’s apparent disinclination to service its external debt.

S&P predicted the country’s foreign exchange reserves will drop from its present level of 250 million US dollars (500 million Belize dollars).

It also anticipates more pressure on the government to increase spending to meet public sector pay demands.

We expect government workers and teachers to demand higher wages once the next budget debate begins, S&P added.