Jamaica just received its best-ever credit rating!  But what does that mean for you and your money?

International credit rating agency S&P Global Ratings recently upgraded Jamaica’s credit rating from B+ to BB-.  This is the best rating we’ve ever gotten from the agency since they started rating Jamaica’s debt in 1999. 

Standard and Poors is one of the big three global rating agencies, along with Fitch and Moody’s. These agencies grade countries’ and large companies’ creditworthiness and give them a score. They look at how likely a Government is to repay its loans in a timely manner, etc. Very similar to how credit agencies will give you a personal credit score, just on a large scale.  Your credit score impacts how much you are able to borrow and on what terms.  If you have a good credit rating, for example, you’re likely to benefit from a lower interest rate.

S&P rates countries on a scale from D being the lowest to AAA+ as the highest. In the B range, it goes B-, B, B+. Then BB-, BB, BB+.  Then BBB-, BBB, BBB+.  Then after that, it’s A all the way up to Triple AAA+.

So Jamaica was at B+.  And we’ve been bumped up to BB-.

So why is this a big deal?

Well, for one it means that S&P has noticed improvements in the country’s debt levels and the Government’s ability to repay loans. It’s a big feather in the Government’s cap because the improved rating also opens Jamaica up to more foreign investors and potentially better terms. 

Remember that these rating agencies are international.  They have the same set of rules for every country, so investors can use the same baseline when considering investments. With Jamaica having a BB- rating, investors gain a certain level of confidence in the country’s economy and the Government’s monetary policies.

More investors means more economic activity and more jobs.

Plus, as Finance Minister Dr Nigel Clarke said, the upgraded rating gives the Government some leverage to get better terms on financing. This equals more savings for the country in the long run.

Along with the new rating, S&P also labelled Jamaica’s economic outlook as stable. Basically, the agency believes all the factors that contributed to the improved credit rating are likely to continue.

Now the agency did point out that the Government still spends a lot just to repay interest from loans. But they said this is likely to fall to 17.5% of revenues within the next fiscal year, and less than 15% by 2026.

So all in all, pretty impressive, especially given that in the not-too-distant past, Jamaica had a CCC rating, which is considered junk bond status, and very high risk for investors.

And that’s the bottom line. oney!