Moody's upgrades Jamaica's ratings

Ratings agency, Moody’s, today upgraded Jamaica's government bond rating and government-related entities to Caa2 from Caa3.

At the same time Moody's has changed Jamaica's debt ceilings while  maintaining a positive outlook.

Moody's Investors Service says the decision to upgrade Jamaica's rating was driven by continued Fiscal consolidation and a strong commitment to structural reform.

The ratings agency says the improved balance of payments position and reduced vulnerability to external shocks such as natural disasters and world events also played a part in the upgrade.

According to Moody’s, the positive outlook reflects expectation that Jamaica will sustain the reform momentum under the IMF-supported program.

It also feels that Jamaica will solidify its fiscal programme of adjustment in a bid to continue to pay down its debts.

The rating action also applies to the Government of Jamaica's related entities: Air Jamaica Limited, and the National Road Operating and Constructing Co. Ltd.

The rating upgrade means that the long-term foreign currency bond ceiling changed to B2 from B3.

The long-term foreign currency deposit ceiling changed to Caa3 from Ca.

Meanwhile, the long-term local currency bond and deposit ceilings have changed to B1.

However, the short-term foreign currency bond and deposit ceilings remain unchanged at NP.

Moody’s is indicating that persistently low economic growth and high debt burden are two factors that continue to constrain Jamaica's rating.

However, it says the Jamaican Government has made substantive progress towards completing its fiscal consolidation program.

Moody’s also noted the introduction of tax and expenditure reform measures, and  the maintenance of a large primary surplus of 7.5% over the past two years.

Moody’s expects these reforms to put public finance on a more sound footing and help reach the set target of cutting the debt to less than 100 per cent of GDP by 2020 from a 135 per cent peak in 2013.

The ratings agency  also noted that Jamaica's current account deficit has narrowed significantly in 2014/15 as a result of continued import compression and the drop in oil prices, with further improvement projected in 2016.