With a debt burden which experts predict will become increasingly unmanageable in the coming years, today Moody's Investors Service has affirmed Belize's Caa2 issuer ratings and the outlook remains stable. The stable outlook on Belize's Caa2 ratings reflects Moody's ongoing concerns about public debt sustainability despite the short-term relief to fiscal liquidity pressures following the 2013 debt restructuring.
Moody's says credit risks could potentially escalate by 2017-18 given that: (1) as the general election approaches, the government will find it more difficult to maintain fiscal discipline as demand for public sector wage hikes and increased social transfers increase; (2) debt service on market debt will escalate due to an increase in the step-up coupon rate - amortization payments will start in 2019; and (3) the compensation amount from litigation claims due to the nationalization of BEL and BTL could push public debt into unsustainable levels. Faced with pressures that could translate into financial stress, the possibility of a pre-emptive debt restructuring remains high through 2017 to 2018.
But what does all that mean? By the reckoning of Moody's analysts, Belize's fiscal imbalances could threaten the country's economic stability as the report shows and we quote, “Although the current fiscal stance would not in itself lead to a significant increase in the public debt-to-GDP ratio, the recognition of liabilities from Belize's nationalizations could push public debt to above 90% of GDP, rendering debt unsustainable.”
Moody’s Rating Service is a company that ranks the creditworthiness of borrowers using a standardized ratings scale which measures expected investor loss in the event of default. A CA22 rating for Belize means that the country is rated as poor quality and has a very high credit risk.
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