Moody's warns of debt default relapse for Jamaica, Belize

Source:Xinhua Published: 2013-5-21 14:18:52

Ratings agency Moody's Investor Service said Monday that there is a high probability that Jamaica and Belize will relapse into default.

"At the moment, we see a high probability that Belize and Jamaica will relapse into default," Moody's said in a statement as it singled out Trinidad and Tobago and Suriname as two of the few Caribbean countries that had stable economies.

Moody's sees the default of Belize, Jamaica and Grenada over the past year as part of a broader debt crisis in the Caribbean.

The report predicts that debt default in the region may persist as countries continue facing a combination of solvency and liquidity pressures.

"The lack of options has left debt restructuring as an attractive tool to reduce public sector debt," said Edward Al-Hussainy, Moody's senior analyst and author of the report.

According to data compiled by the International Monetary Fund, Jamaica's national debt exceeded 100 percent of its gross domestic product (GDP) and other small Caribbean states were carrying debts above 70 percent of GDP.

"At its core, the Caribbean's debt crisis is the result of a combination of poor fiscal discipline and unproductive investment that failed to significantly raise potential growth rates," Moody's said.

This legacy of debt accumulation started in the 1990s, as governments accelerated borrowing, often from external commercial sources, to finance public-sector investment, it explained.

The ratings agency did, however, acknowledge that the frequency of natural disasters, such as hurricanes and floods, have assisted in destabilizing the economies of many Caribbean countries, contributing to the economic woes they now face.

"As new restructuring unfold, we expect governments to be more aggressive in seeking principal haircuts to achieve lower debt loads," Al-Hussainy said.
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