Patrick Manning, Prime Minister of Trinidad and Tobago. - FILE
PORT-OF-SPAIN (Trinidad Guardian):
MOODY'S INVESTORS Service has upgraded Trinidad and Tobago's foreign currency bond rating to Baa1 from Baa2 in light of continued improvement in the country's external position and declining debt ratios.
The action, was consistent with Moody's general view that foreign and domestic currency government bond ratings should be more closely aligned. To that end, the local currency bond rating was affirmed at Baa1, the rating agency said in a statement, on Thursday.
"T&T's external payments position is especially impressive in light of continued growth in energy exports and sizeable foreign direct investment," said Moody's Alessandra Alecci. "The resulting accumulation of foreign exchange reserves
has consolidated T&Ts already strong net external creditor position."
EXTERNAL INDICATORS
As a result of the energy windfall, the analyst explained, key external indicators have placed T&T in a favourable position compared to other similarly-rated, energy-producing countries.
Diversification within the energy sector should help sustain export growth in coming years, which should lead to further improvement in the country's external position, the rating agency said. Despite the upgrade, according to Moody's, T&T may face important challenges in the future.
"In particular, we have found that the marked rise in primary expenditures could complicate a fiscal adjustment, if one became necessary. Moreover, the implementation of the capital programme by public entities outside of the central government poses risks to expenditure restraint, which is an essential component of macroeconomic stability." said Alecci.
She added that continued prudent management of the energy windfall will be required to maintain external competitiveness and to ensure that the country is well equipped to face a possible downturn in the energy cycle.
The foreign-currency country ceiling for bonds was upgraded to A1 from A2, and the foreign currency country ceiling for bank deposits was upgraded to Baa1/P-2 from Baa2/P-3.
T&T's local-currency deposit ceiling remains at A1 and the local-currency guideline, which represents the highest possible rating that could be assigned to obligors denominated in local currency within the country, remains at Aa3. The outlook on all the ratings is stable.
