TEXT-S&P affirms Jamaica’s ratings

(The following statement was released by the rating agency)

— Jamaica’s fiscal position modestly improved after the government
concluded its fiscal debt exchange and signed an agreement with the
International Monetary Fund.

— A package of new fiscal measures has been implemented. However, the
country’s debt and interest burden remains one of the highest of all rated

— We have affirmed all of the ratings on the sovereign.

— The outlook remains stable.

Dec 22 – Standard & Poor’s Ratings Services said today it affirmed its ‘B-‘
long-term and ‘C’ short-term sovereign credit ratings on Jamaica. Standard &
Poor’s ‘3’ recovery rating and ‘B’ transfer and convertibility assessment is

The outlook remains stable.

Standard & Poor’s said that the ratings on Jamaica reflect the modestly
improved fiscal position after the government concluded its distressed debt
exchange (JDX) in February 2010. As a result, interest payments were reduced
from 63% of general government revenue in 2009 to an expected 42% in 2010.
Standard & Poor’s credit analyst Roberto Sifon Arevalo noted that in line with
the $1.27 billion standby arrangement signed with International Monetary Fund
early in 2010 the government introduced a series of fiscal measures that
included divestment of public enterprises, a freeze on public sector employees’
salaries, a new ad valorem fuel tax, and a 5% advanced general consumption tax
payment on goods imported for commercial purposes.

The government expects an increase in revenues of about 1.8% of GDP from
these measures. “In our view however, the slow pace of economic recovery will
make this outcome hard to achieve” said Mr. Sifon Arevalo. After contracting by
3% in 2009, GDP is expected to contract again by about 1% in 2010. Trend growth
is not expected to be above 1 or 2% over the next three years.

“We expect the general government deficit to remain high at 8.4% of GDP in
fiscal 2010 due slow growth and reconstruction costs after severe rains hit
Jamaica in September 2010,” said Mr. Sifon Arevalo. Finally the rating agency
said that it will be key for the rating that the government implements a
medium-term strategy for reducing the onerous debt burden by improving the
primary fiscal balance as well as economic growth prospects.

“This is especially the case given that the IMF agreement is due to
terminate in August 2012, just a few months ahead of general elections,” said
Mr. Sifon Arevalo.

“If the government is not able to implement a sustainable economic plan, we
would likely lower the rating. Conversely, if the government is able to improve
its fiscal stance through a credible medium term economic plan,
creditworthiness could improve.”

TEXT-S&P affirms Jamaica’s ratings