( L - R ) Davies, Shaw
The Government has reacted with surprise and disappointment at the decision by the international rating agency Standard and Poor's (S&P) to further downgrade Jamaica's credit rating from B- to CCC+.
The move by S&P came on Wednesday based on what it said was "Jamaica's vulnerable fiscal profile, combined with difficult financing conditions, (which) may compel the Government to undertake a debt exchange that we could regard as a distressed debt exchange".
But yesterday, the Government fired back arguing that "the rating action ignores several positive developments that have taken place in recent weeks".
The Bruce Golding administration pointed to what it said were continued signs of an improved outlook for Jamaica's credit profile supported by the decision to apply to the International Mone-tary Fund (IMF) for a standby arrangement.
The right direction
According to the Government, developments such as the over-subscription of locally issued debt and the sharp reduction in market-determined interest rates were clear signs that the country was headed in the right direction.
"The Government of Jamaica believes that S&P's ratings action are out of context given these developments," Finance Minister Audley Shaw said in a release.
Shaw also rejected S&P's claim that the Government was embarking on a debt exchange that could be regarded as a "distressed transaction".
But even as the Government blasted S&P over its action, Opposition spokesman on Finance, Dr Omar Davies, argued that the downgrade reflected clear deficiencies in the management of the country's economic affairs by the administration.
"Whilst the Opposition recognises the negative impact of the world recession on the country, the plain fact is that the administration's overall economic management and the handling of fiscal matters, in particular, have done very little to promote confidence, either domestically or externally," Davies argued.
He was supported by one of the country's leading financial analysts who requested that The Gleaner withhold his name.
"Too often in Jamaica, we kill the messenger and not listen to the message," the analyst said.
"CCC+ was where Venezuela was rated before it defaulted on its debts and the latest numbers from the finance ministry confirm what I have been saying for some time that we are in serious trouble," added the analyst.
He pointed to provisional figures for the first three months of this fiscal year which show revenue at $62 billion or almost $8 billion below projections. At the same time, expenditure was at $98 billion or $3.6 billion below projection.
This left the administration facing a fiscal deficit of almost $36 billion or $4 billion more than it projected.
Very worrying
"It is very worrying, and what is even more worrying is our reaction. We cannot react to numbers, we must project numbers and act accordingly," the analyst said.
That is a position shared by Davies who has repeated his call for a full debate in Parliament on the Supplementary Budget before any agreement with the IMF is finalised.
"The downgrade by S&P cannot be dismissed or blamed solely on the impact of the global economic situation. While the S&P downgrade is regretted, the situation can be retrieved by decisive action guided by informed analysis," Davies argued.
See the Financial Gleaner for more on the S&P downgrade.