Press Release:- Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed the assigned ratings of CariBBB- (Foreign Currency and Local Currency Ratings) on its regional rating scale to the several debt programmes of the Government of Saint Lucia (GOSL).
These ratings indicate that the level of creditworthiness of these debt obligations, adjudged in relation to other debt obligations in the Caribbean, is adequate.
CariCRIS has also maintained a stable outlook on the ratings.
The stable outlook is premised on our expectation of strong construction activity and a partial recovery in tourism in 2021, and that debt to GDP would not breach the current rating category’s limit.
Furthermore, we expect that debt to GDP would plateau with borrowings for the Hewanorra International Airport’s redevelopment but would thereafter decline as: (i) COVID-19’s negative fiscal impacts begin to taper off, (ii) GDP improvements lead to better fiscal performance and (iii) fiscal consolidation towards achievement of the Eastern Caribbean Currency Union’s (ECCU) debt to GDP target of 60% by 2035 is pursued.
The ratings on Saint Lucia continue to reflect: (1) its monetary and exchange rate stability
underpinned by membership in a quasi-currency board arrangement, (2) sound financial sector despite COVID-19 challenges, and (3) economic activity is broad-based although dependent on COVID-ravaged tourism; moderate GDP strengthening is expected in coming years.
These rating strengths are tempered by: (1) the worsened fiscal position and significantly increased indebtedness of GOSL brought on by COVID-19, and (2) international reserves are under pressure; however, external debt servicing is expected to be adequate.
Rating Sensitivity Factors Factors that could, individually or collectively, lead to an improvement in the ratings and/or Outlook include:
• Substantial changes in the debt levels leading to a debt to GDP ratio below 65%
• Achievement of a balanced budget over the medium term
• Sustained GDP growth of the order of 3% per annum or more (above pre-COVID19 level)
Factors that could, individually or collectively, lead to a lowering of the ratings and/or Outlook include:
• Significant changes in the fiscal position leading to a deficit larger than 15% of GDP
• Substantial changes in the debt levels leading to a sustained debt to GDP in excess
of 90% alongside a decline in debt servicing to 2 times