JAMAICA'S ABILITY to pay its debts is as strong as it has been in several years, and this has been reflected in the market performance, according to
credit rating firm Bear Stearns.
In 2004, Jamaica was the best performing country in the Bear Stearns BSCAX index of Central American and Caribbean sovereign debt, with a total return of 26.15 per cent, key company analysts said. Year-to-date in 2005, the Jamaica composite of the BSCAX index has returned 7.4 per cent (not annualised).
This performance puts it among the top-performing emerging market country bond issuers over the period.
A relatively strong economic-policy consensus in the country has contributed to high local business and investor confidence, Bear Stearns analysts said in their latest report on the countr,y released yesterday.
Prospects for a balanced budget in the current fiscal year ending March 31, 2006, and an investment pipeline in local projects that bodes well for future economic growth are also favourable for the country.
TABILITY OF THE DEBT DYNAMICS
But the stability of the debt dynamics continues to make Jamaica dependent upon sustained favourable economic and policy trends. And the analysts said nearly one-quarter of the domestic debt needs to be rolled over in the current fiscal year, and the memorandum of understanding with the public sector unions a key underpinning of the budget will need to be renegotiated in the fourth quarter.
Jamaica's bond yields have converged with other 2B and 3B sovereigns such as Brazil, Philippines and Venezuela, though they remain higher. "We have rated Jamaica as market-perform in the context of our Central America and Caribbean relative value framework. We are upgrading this recommendation to outperform."
After beginning the year with an outperform recommendation on Jamaican bonds, "we scaled back our recommendation to market perform in February, based mainly on valuation considerations," they said. "The consolidation in Jamaican bond prices that we expected leading up to the April budget debates materialised in March and April, but in May, Jamaica has resumed its outperformance relative to the market."
