Downgraded credit rating won’t affect regional borrowing – PM

Prime Minister Dr Ralph Gonsalves does not expect the downgrade of his government’s credit rating to make borrowing more expensive for St Vincent and the Grenadines (SVG) regionally.{{more}}

“I don’t expect us to have any problems … borrowing our monies on the regional government securities market at the same level of interest rate, by and large,” he told SEARCHLIGHT Wednesday.

Gonsalves, who is also Minister of Finance, was speaking in a telephone interview one day after Moody’s Investors Service downgraded the rating of the Government of St Vincent and the Grenadines (SVG) to B2 from B1.

“At B2, the outlook is stable,” Moody’s, however, said.

Gonsalves said SVG and St Lucia have been borrowing consistently at below four per cent interest.

Dominica joined the two recently, he said, but added that other countries, including Grenada, have been paying over six per cent interest on their treasury bills.

Standard & Poor’s, another rating agency, on Monday lowered its foreign currency sovereign credit ratings on Grenada following a missed bond payment.

The outlook on Grenada’s long-term local currency ratings is negative, S&P said.

All four countries — SVG, Grenada, Dominica and St Lucia — belong to the eight-member Eastern Caribbean Currency Union.

“The marking is like CXC and GCE,” Gonsalves said of the different rating agencies.

His reference was to the two type of secondary school leaving examinations that Vincentians students can choose between.

He noted that his government, as with others nations, chose its rating agency and invited them to make an assessment.

“Basically, what they have said is what I have been saying in the last several years since the international economic crisis [which began in 2008]: that we have low, or no growth, we are very vulnerable to external economic shocks…” Gonsalves told SEARCHLIGHT.

He explained that the vulnerability is “also to nature” and that “we have had a deterioration in the fiscal situation.

“Even though our situation has improved this year relative to last year, it is still not where it should be,” he said.

“I am not quarrelling with the rating, somebody else could have come and left it at B1,” he said, noting that when S&P downgraded the US last year, other agencies left their rating of the country unchanged.

“I believe Grenada is making some query about their own grading. I take it all in strides,” Gonsalves said.

He said when his government came to office in 2001, the nation paid 6.5 per cent interest on its treasury bills, adding that it paid 3.5 per cent interest on the last set.

Gonsalves further said there were “one or two small areas inside their (Moody’s) document, but I am not going to overly quarrel with them.

“For instance, they talk about four years of economic contraction, but it is only three years. The ECCB has made it plain that there was no contraction last year. But there was only small growth.”

Asked about Moody’s observation that his government was increasingly dependent on loans from the regional market, Gonsalves said:

“We try to avoid the global markets because of the rates on the commercial market. … We try to stick to concessionary loans from established institutions, the CDB (Caribbean Development Bank), the World Bank, European Investment Bank and so on. … We really don’t go outside, so that doesn’t affect us.”

He further said that after 11.5 years in office, his Unity Labour Party government has increased the stock of treasury bills from $48 million to $75 million.

“And if you do it as proportion of what our GDP (gross domestic product) is, you will see that the current treasury bills are less as a percentage and is just about the same in relation to our revenue.

“So, you have judgement like those which people could legitimately quibble about them,” he said in reference to the “one or two areas” in the Moody’s document. (kentonchance@searchlight.vc)