Morrison JAMAICA'S PRIVATE sector stands to benefit from the recent improvement in the country's credit rating says senior director of the Jamaica Bauxite Institute (JBI), Dennis Morrison.
Minister of Finance and Planning, Dr. Omar Davies, announced in Parliament last Tuesday, that the United States-based financial rating agency Standard & Poor's had boosted Jamaica's local currency long-term credit rating from a B+ to a BB-. The global bond rating agency measures the likelihood of loan default by bond issuers and a BB rating shows improved repayment prospects over the former rating.
"Investors looking on will see Jamaica as being somewhat less risky," Mr. Morrison said. "This means they will be more prepared to provide credit to the private sector,"
Foreign investors would also look on Jamaica as a more attractive place to do business because of the improved risk assessment, he noted.
Standard & Poor's cited the strengthening of the financial sector and improved prospects for macro-economic stability as contributing to the upgrade, Dr. Davies said. The agency recognised the Government's recent privatisation successes, including that of Union Bank and the Jamaica Public Service Company, and the planned divestment of the National Commercial Bank, as auguring well for the development of the economy.
The country's long term foreign currency risk rating was also improved, moving from B to B+ by Standard and Poor's. The Finance Minister said this rating upgrade coincided with the launching of a US$275 million Eurobond issue priced at 11.75 per cent.
"Though the size of the issue was finalised at US$275 million, over $415 million in offers were received," Dr. Davies said. "We were able to package an extremely attractive bond with the assistance of our advisors Bear Sterns and Company."
Mr. Morrison said the Government would benefit from the ratings improvement as the international capital market would be prepared to accept lower interest rates from Jamaica, and the market would be prepared to lend for longer periods.
"Proceeds from the bond issue will allow the Government to reduce its borrowing in the local market," Dr. Davies said. This reduced borrowing sets the stage for local interest rates to fall.
He said some of the proceeds of the bond would be used to help meet the Financial Sector Adjustment Company (FINSAC) debt obligations.
