Rating agencies provide global investors with information on the ability of corporations and countries to pay back debt – for example, how likely they are to make interest payments on time, or to default.
The three main global credit rating agencies are Standard and Poor’s (S&P), Moody’s and Fitch Ratings. Being downgraded can have a big impact on a country’s ability to borrow money on the markets and Investors see it as a riskier bet and demand higher returns to lend to governments.
As our credit rating declines, for an ordinary person, it means paying more interest, leaving little money for savings and expenditure on basics survival items such as food, housing, medicine not to mention education and transport costs. This is because governments need to allocate more of our national income for interest payments on our loans.
Less money would therefore be available for social works, development priorities, creating jobs and ultimately reducing the GDP growth potential of the country as we have been seeing in Trinidad and Tobago over the past 2 years.
More interest payment also crowds out other critical public spending such as CDAP and basic health care. We would therefore be forced to borrow more leading to a vicious cycle.
Basically with every downgrade investors see more risk and governments are left with fewer options to rescue the economy.
On April 27, 2018, S&P Global Ratings revised its outlook on the Republic of Trinidad and Tobago to BBB+ negative outlookfrom stable outlook due to large macroeconomic risks and increases in external imbalances following an estimated 7% contraction in real GDP over the past two years.
They advised Based on all indicators the country would see exchange rate pressure, restrictions on accessing foreign currency, negative yield differentials on short-term treasury securities (relative to those of the U.S) and a faster depletion of the country’s external assets.
A cause for concern is the negative outlook reflects their view that there is at least a one-in-three chance that they could lower the ratings over the next 12-to-24 months if government’s borrowings increase and no improvement is made in its large revenue collection leakages and the economy’s reliance on a fast depleting gas supply.
Here is the timeline of the economic disaster -:
• In December 24th 2015 our S&P rating was A with a negative outlook.
• In 2016 our S&P rating went to A- with a negative outlookwhilst our Moody’s went from Baa2 to Baa3.
• In 2017 our S&P rating dropped dramatically to BBB+stable whilst Moody’s Investors Service (“Moody’s”) downgraded Trinidad and Tobago’s issuer and senior unsecured debt ratings from Baa3 to Ba1 – junk grade status.
• 2018 S&P BBB+ Stable to BBB+ negative outlook. Moody remains at May 1st junk grade status of Ba1. NGC our most profitable energy company is also credit rated at Ba1 by Moody’s which is classified as junk status (non- investment grade).
The UNC National Women’s Arm must ask the Government of Trinidad and Tobago ,What’s next?
Marisa V Ramlogan
Public Relations Officer
UNC National Women’s Arm