S&P cuts Barbados ratings

Standard & Poor's said it lowered its long-term foreign currency sovereign credit rating on Barbados to BBB+ from A- and its long-term local currency rating on Barbados to A- from A+.

S&P also lowered its short-term local currency rating on Barbados to A-2 from A-1.

The outlook on both the local and foreign currency ratings is stable.

"The downgrades reflect the government's decreased fiscal flexibility as a result of slower-than-expected deficit reduction and significant off-budget spending, even as economic growth has strengthened," explained S&P credit analyst Philippe Sachs.

In addition to maintaining general government debt (excluding debt held by the government-owned pension fund) at more than 60% of GDP - which is above the A median of 35% and BBB median of 40% - fiscal imbalances have contributed to an unanticipated widening of the current account deficit to 7.4% of GDP in 2004.

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