Posted: Thursday, December 10, 2020. 2:22 pm CST.
By Aaron Humes: Two weeks after cutting Belize’s credit rating to CAA3 from CAA1, anticipating calls to again restructure the Superbond, Moody’s investor service has issued its periodic review of Belize’s ratings.
The credit profile of Belize, it says, is supported by the country’s “B3” economic strength, reflecting the small size and limited diversification of the economy, weak real GDP growth and low wealth levels in addition to extensive competitiveness challenges; Belize’s “B3” institutions and governance strength, reflecting worldwide governance indicators that are broadly in line with ‘Caa’-rated peer medians in most categories and a history of debt restructurings that undermines the sovereign’s debt repayment track record, including a recent deferral of interest payments on external market debt; its “CA” fiscal strength, taking account of the government’s very high debt burden, low debt affordability; and its “CAA” susceptibility to event risk, driven by government liquidity risk, which reflects risks to the government’s capacity to meet its debt obligations in the context of a sharp drop in revenues owing to a strong decline in tourism flows and limited access to funding.
The review is done quarterly and not in conjunction with a further credit rating action.
Moody’s previously said it expects debt ratio to GDP to reach more than 130 percent by year’s end. New Prime Minister John Briceño estimated that it was already at 132.9 percent after months of borrowing to meet recurrent expenditure such as salaries.
Former Prime Minister Dean Barrow had signaled that there would certainly be a need to again restructure the Superbond as part of a wider debt relief program for countries such as Belize.
After deferring interest payments worth US$27 million between August 2020 and May 2021 on the 2034 Superbond, Belize’s financial position remains so strained that further relief will be sought that leads to renewed losses for investors, the firm stated, expecting that Belize will either outright miss payments or exchange distressed debt because the tourism-dependent economy has not fully recovered from containment of travel due to the COVID-19 pandemic.
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