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Standard and Poor's on Monday, July 28, 2003, changed its rating on Jamaica's long-term foreign currency debt from "B+" to "B" and that on long term local currency debt from "BB-" to "B+". The "B'' rating assigned to short-term foreign and local currency debt was affirmed. The outlook for the rating is "Stable". The changes in the ratings have been attributed to a combination of factors including an increased debt burden, heightened fiscal pressures, vulnerability of the debt to volatility in exchange rate and interest rates movements and limited growth prospects. The rating is supported by the existence of a stable political environment with broad agreement on the general direction of macroeconomic policies and the completion of the restructuring of the financial sector. It should be noted that Standard and Poor's conducted its review of Jamaica in May 2003. Subsequently, data for the April-June quarter of FY2003/04 show the fiscal operations performing noticeably better than budgeted. Tax revenue was 4.4% higher than projected and expenditure has been contained at a level 8.1% lower than budgeted. In addition, the foreign exchange market has stabilized, interest rates have begun to trend downwards and the economy continues to record positive growth. These positive developments have had favourable impact on the trading levels of the GOJ global bonds reflecting a return of confidence by the international investment community in Jamaica. Since the announcement of the budget in April, the global bonds have rallied strongly with marked gains in all maturities. The Government agrees with Standard and Poor's that a significant fiscal adjustment is underway and remains committed to the process as this will lead to the reduction in the debt stock and ultimately the debt burden. However, as has been stated repeatedly, it recognizes that this cannot be achieved in the short-term and has embarked on a medium term programme to return the fiscal operations to a balanced position by FY2005/06.
Ministry of Finance and Planning
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