Senior Multimedia Reporter
peter.christopher@guardian.co.tt
Wednesday’s decision by Standard & Poor’s to uphold T&T’s investment-grade rating of BBB- is a good sign, but experts note that the ratings agency’s decision to maintain the country outlook at negative is a concern.
Former Minister in the Ministry of Finance, economist Mariano Browne said the rating reflected the Ministry of Finance managing cash flow with “one eye on the rating.”
“That’s the reason why we don’t know how much back pay is unpaid. We don’t know how much VAT is unpaid.” said Browne.
“There are drawdowns from the Heritage and Stabilisation Fund (HSF), that have made the deficit look reasonable. And that is what rating agencies do. They examine your capacity to repay on the basis of the information that they have. The information is that the deficit is down. And the fiscal deficit, they had improved from a primary deficit to a primary surplus. That’s what the central bank indicated as of the 30th of June.”
Browne said based on this the rating was maintained but the government has much to address in the upcoming budget.
“I think the rating agencies have given the government of Trinidad and Tobago a pass until we see how the next round sorts itself out. So, we wait and see what happens in the budget,” he said.
Another economist, independent Senator Dr Marlene Attzs said the rating is positive as it highlighted strengths including the HSF and expected gas production in the mid term. However she explained the negative outlook indicated T&T should be mindful of its overall fiscal position and rising debt considerations.
“The Ministry’s statement should be read alongside the full S&P report. While the rating has been affirmed, the negative outlook remains in place. That is an important signal. It indicates that S&P continues to see material downside risks and believes there is at least a one-in-three chance of a downgrade over the next 12 months if longstanding structural weaknesses are not adequately addressed,” she said.
“Those concerns extend beyond the energy sector. They include persistently slow economic growth, limited progress in economic diversification, the gradual weakening of fiscal and external buffers, and the need to strengthen the sustainability of the country’s public finances. These are cautionary notes that deserve careful attention.”
She added, “The critical question remains whether borrowed resources and HSF withdrawals are financing investments that expand the country’s productive capacity and future foreign exchange earnings, or simply meeting today’s recurrent obligations.
“The affirmation of investment grade is welcome. But the negative outlook is an equally important reminder that maintaining—and ultimately improving—that rating will require sustained fiscal discipline, stronger economic growth, meaningful diversification and careful management of the country’s debt profile over the years ahead.”
Economist Dr Jamelia Harris pointed out there was a difference in outlook between major agencies as Moody’s changed its outlook to “stable” in June, whereas S&P has maintained a “negative” outlook.
“A negative outlook from S&P means that T&T’s ratings by this agency could be revised downwards over the next 12 months unless there is evidence of fiscal and economic improvements,” she said, “The S&P release notes that, ‘We could lower the ratings on Trinidad and Tobago over the next 12 months if the country fails to address the prolonged weakening of public finances and diminution of foreign exchange reserves, which in our view, reflect institutional shortcomings that limit the government’s capacity to build buffers against negative shocks’.”
She stressed, “This echoes the call for the need to address structural challenges in the economy that many economists have been making for some time now.”
She suggested this meant S&P had given the government a “grace period” to address such concerns.
