Fitch upgrades Jamaica’s rating to BB-
Published:Tuesday | March 5, 2024 | 8:01 PM
Jamaica's Long-Term Foreign-Currency Issuer Default Rating (IDR) has been upgraded to 'BB-', with the outlook remaining “Positive”.
BB national ratings denote an elevated default risk relative to other issuers or obligations in the same country or monetary union.
This puts the quality of Jamaican debt at just below investment grade, more properly called speculative grade, according to Fitch in its ratings definitions.
This tells international investors that Jamaica's sovereign debt is good enough to attract investment despite vulnerabilities.
A release from Jamaica's Ministry of Finance notes that Fitch's rating action is the third upgrade for Jamaica in Financial Year 2023/24, following positive actions by Standard and Poor's Global Ratings on September 13, 2023, and Moody's Ratings on October 18, 2023.
In the release, the finance ministry said “the rating upgrade results from the Government's continued commitment to a stable economic policy framework underpinned by the Bank of Jamaica's inflation-targeting monetary policy as well as sound fiscal management anchored on debt reduction targets. The central bank has been grappling with a post-COVID-19 pandemic spike in inflation, the rate at which the cost of goods and services increase over time.”
After shooting up to 10.3 per cent in 2022, inflation moderated to 5.8 per cent in April 2023, which was within the central bank's targeted range of 4-6 per cent.
After settling at 5.08 per cent in October 2023, the inflation rate has stubbornly remained at above 7 per cent since late 2023.
In response, the BOJ has set the policy rate governing interest rates in the financial system at seven per cent.
In the meantime, Fitch is highlighting the Jamaican Government's commitment to delivering large primary surpluses, the positive difference between the amount of money the government takes in through taxes, grants and other receipts and the amount it spends.
Fitch says this has supported a significant reduction in Jamaica's debt burden, which presently stands at a targeted 72 per cent of GDP.
Commenting on the development, Finance Minister Dr Nigel Clarke said “This credit rating applied by Fitch is the highest rating that the Government of Jamaica has secured from Fitch since Fitch started rating Jamaica's debt 18 years ago. This is yet another testament to the effectiveness of the Government's economic policymaking framework in improving Jamaica's economic independence.”
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