Jan 2011 Financial News

Dookeran: Long term outlook stable

Jan 18, 2011

Finance Minister Winston Dookeran has defended Government’s approach to the Colonial Life Financial/Clico and said if it did not come up with the 20-year bond deal the country’s A rating at Standard & Poor’s (S&P) would have fallen.

He spoke yesterday during the Banker’s Association launch of banking week at Cascadia Hotel, St Ann’s.

“If for some reason, we had not adopted the approach to Clico, we would have gone on the edge and prospects of having a positive rating would have been reduced,” he said.

On January 14, S&P released the country’s rating, reaffirming the A for foreign currency and A+ for local currency long-term sovereign credit ratings. At the same time, the country received an ‘A-1’ short-term ratings.

With the long-term rating outlook remains stable, while ‘AA’ transfer and convertibility assessment is unchanged.

On its Web site, S&P said they expect Government “to muddle through” the CL Financial debacle without further eroding its balance sheet.

The agency said it expects Government debt to rise to 28 percent of Gross Domestic Product (GDP) this year from 15 percent because of the CLF/Clico bailout. However, this is still below the 36 percent average for an A rating.

Dookeran said this was an important indicator of the confidence of the international community in the financial management of our country.

“There is the prospect now, of engaging in a creative economic plan. In that sense, the quality of assets of the banking sector would improve, as a result we expect notwithstanding the public policy measures to reduce interest rates, the new credit status would allow interest rates to reduce even more in the country for the purposes of generating investment, for reigniting growth and for the purposes to ensuring a sustainable financial security in the future,” he said.

It added improvements in transparency, governance and regulation in the financial industry and among public sector enterprises, in particular, could lead them to raise its ratings on the country over the medium term.

On the other hand, fiscal deterioration, as well as further slippages in the pace of restructuring government-owned entities, could lead them to lower the ratings.

Dookeran said in light of this, the Government would be embarking on several programmes that would create opportunities for economic growth.

“We are about to engage the International Financial Co-operation, financial arm of the World Bank to work with us on three broad areas, one has to do with the issue of the ease of doing business to deal with the bureaucratic constraints,” he said.

The second area included increasing public offerings in the country by ensuring they can build a stronger capital market and develop a strong secondary capital market, both of which are requirements for investment promotion.

Dookeran also reiterated Government’s plans to list public companies on the stock market, opening them up to being purchased by the public.

“We shall work towards monetisation of the state sector through the structured approach and create opportunities for increased activity in the stock market in TT at the same time, it would give us the opportunity to streamline the state sector, in such a way we could achieve two goals, we can ensure we maintain the strategic objectives of ensuring the protection of TT’s economy and recreate opportunities for the wider community to participate in the ownership of the national community,” he said.


Source:
Darcel Choy
Newsday
Tuesday January 18, 2011

http://www.newsday.co.tt/business/0,134269.html