In­ter­na­tion­al rat­ing agency Stan­dard & Poor’s, yes­ter­day af­firmed T&T’s BBB- cred­it rat­ing, with a sta­ble out­look, ac­cord­ing to a news re­lease from the Min­istry of Fi­nance.

Word of the S&P rat­ings ac­tion fol­lows the Ju­ly 10 de­ci­sion by Moody’s, an­oth­er in­ter­na­tion­al rat­ing agency, to af­firm the coun­try’s Ba2 sov­er­eign rat­ing, but to move T&T’s out­look up­wards from sta­ble to pos­i­tive.

In the news re­lease, Min­is­ter of Fi­nance, Colm Im­bert, un­der­scored the fact that “S&P’s af­fir­ma­tion of our cred­it rat­ing is a pos­i­tive de­vel­op­ment and T&T is one of the few in­vest­ment-grade coun­tries with­in the Latin Amer­i­ca and Caribbean re­gion, and in fact, the on­ly one in the Caribbean.”

The min­istry said while the cred­it rat­ing had a neg­a­tive out­look up to Ju­ly last year, T&T’s eco­nom­ic and fi­nan­cial per­for­mance along with its in­sti­tu­tion­al sta­bil­i­ty helped to sta­bilise the out­look there­after. This sta­ble out­look has now been reaf­firmed, ac­cord­ing to the min­istry.

The min­istry quot­ed S&P as say­ing: “The cred­it rat­ing re­flects T&T’s favourable ex­ter­nal pro­file and sta­ble democ­ra­cy. It al­so re­flects still-sol­id gov­ern­ment fi­nan­cial as­sets that mit­i­gate the ef­fect of eco­nom­ic cy­cles on fis­cal and ex­ter­nal per­for­mance.”

It al­so not­ed that, faced with a pro­pi­tious sit­u­a­tion in 2022, the gov­ern­ment “used the sur­plus to ac­cel­er­ate Val­ue Added Tax (VAT) re­funds and con­tribute to the Her­itage and Sta­bil­i­sa­tion Fund (HSF),” ac­cord­ing to the min­istry.

It said S&P does not ex­pect “net debt [to] rise ma­te­ri­al­ly, and to re­main be­low 30 per cent of GDP, sup­port­ed by as­sets held in the coun­try’s HSF.”

The min­istry said S&P al­so high­light­ed T&T’s good pol­i­cy prac­tices, stat­ing: “Un­like many com­mod­i­ty ex­porters, dur­ing boom years, T&T saves ex­cess fis­cal rev­enues in the HSF.”

Over­all, Im­bert added, “S&P ac­knowl­edges the pru­dent man­age­ment of an econ­o­my faced with ex­ter­nal shocks: sup­port­ing the econ­o­my and the pop­u­la­tion in dif­fi­cult times, and con­ser­v­a­tive­ly re­plen­ish­ing ex­ter­nal buffers and low­er­ing pub­lic debt in bet­ter times.

“Those are the at­trib­ut­es of in­vest­ment grade coun­tries, and the con­di­tion for af­ford­able fi­nanc­ing look­ing for­ward.”

Ex­change rate con­straints

In the re­port–a copy of which Guardian Me­dia re­ceived af­ter the news re­lease from the Min­istry of Fi­nance–S&P said a heav­i­ly man­aged ex­change rate and a small open econ­o­my will con­tin­ue to lim­it the ef­fec­tive­ness of mon­e­tary pol­i­cy.

“The Cen­tral Bank has sus­tained a qua­si-fixed ex­change rate since 2016,” said the rat­ing agency, adding. “Since then, US dol­lar short­ages have con­strained eco­nom­ic ac­tiv­i­ty, weak­en­ing lo­cal busi­ness­es’ abil­i­ty to pay sup­pli­ers and ob­tain key im­ports.”

S&P not­ed that the Cen­tral Bank low­ered its re­pur­chase rate to 3.5 per cent from 5.0 per cent at the start of the pan­dem­ic in a more ac­com­moda­tive mon­e­tary pol­i­cy stance, and has kept the rate at that lev­el since.

“As US Trea­sury rates rise, the in­ter­est rate dif­fer­en­tial be­tween lo­cal se­cu­ri­ties and US Trea­suries has once again be­come neg­a­tive, which could have im­pli­ca­tions for cap­i­tal out­flows.”

On the is­sue of T&T’s in­fla­tion rate, the rat­ing agency not­ed it had his­tor­i­cal­ly been low, av­er­ag­ing 2.1 per cent be­tween 2017 and 2021.

It point­ed out that T&T, like many oth­er coun­tries, faced high­er-than-usu­al in­fla­tion in 2022 (5.8 per cent), and the rat­ing agency ex­pects price lev­el growth will re­main high at about 5.1 per cent in 2023 be­fore falling to 2 per cent in the next three years.

In its overview, S&P said: “We be­lieve T&T’s econ­o­my will ex­pand by 2.5 per cent in 2023 and 1.7 per cent in 2024, re­flect­ing still sup­port­ive glob­al en­er­gy prices, oil and gas pro­duc­tion in line with pri­or-year lev­els, and con­tin­ued growth in the non-en­er­gy sec­tor.

“Gov­ern­ment rev­enues im­proved sig­nif­i­cant­ly last year, and we ex­pect they will re­main rel­a­tive­ly high over the next few years.

“Ex­ports in­creased about 50 per cent year over year in 2022, and we ex­pect they will de­cline slight­ly while re­main­ing above his­tor­i­cal lev­els. Con­tin­ued cur­rent ac­count sur­plus­es will al­so help slow the de­cline in cen­tral bank re­serves, while sig­nif­i­cant gov­ern­ment liq­uid as­sets lim­it fis­cal and ex­ter­nal fi­nanc­ing risks.”