Moody's downgrades Fiji's credit rating
Updated
International credit rating company, Moody's Investors Service, has downgraded Fiji's credit rating. The move follows a downgrade from another credit rating agency, Standard and Poors, last week. Fiji is now considered more risky for investors, and Moody's says a number of investment projects have not gone ahead in Fiji because of the political unrest. Senior credit officer with Moody's, Steven Hess, says there are negative pressures on the rating and there is a possibility of further downgrade if international reserves continue to decline and political instability continues.
Presenter Kate McPherson
Speaker: Senior Credit Officer and Vice President of Moody's Investors Service Steven Hess
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KATE McPHERSON: You have downgraded Fiji's credit rating to B1 from BA2. What does this effectively mean?
STEVEN HESS: Our ratings are opinions of the credit worthiness of a Government, and if you're in the single B range, B1, that is a very low rating. Our rating starts with triple A. That's the rating of the Australian Government, for example. And when you're in the single B category, that indicates that we believe that although we don't expect Fiji to default on its debt anytime in the near future, the probability of such an event is rising.
KATE McPHERSON: Why has Fiji's credit rating been downgraded?
STEVEN HESS: There are several reasons. The most important is their access to external financing. For example, loans from the World Bank or the Asian Development Bank has effectively been cut off, new financing from those sources. Because foreign Governments, who are the shareholders in those lending institutions do not approve of what's happened politically.
KATE McPHERSON: So how do investors perceive Fiji at this time?
STEVEN HESS: Well, I think that the political events in Fiji and particularly the recent abrogation of the Constitution and reappointment of the military Government have seriously damaged the investment climate in Fiji. A number of projects that were talked about as possibilities have not gone forward with a lack of investment, or a very low level of investment the growth prospects for the economy are being damaged and the economic strength of the country is being weakened.
KATE McPHERSON: How will the credit rating downgrade effect Fiji's economy?
STEVEN HESS: Because they don't have a large amount of external debt, and that's what we rate is that bond, there's not a large amount of external debt outstanding. Our ratings shouldn't have a direct effect on a large, a number of investors. However, our rating is an opinion of the credit worthiness of the Government and overall credit conditions in the country, and I believe some people may at least take that opinion into account when they make decisions about investing in Fiji.
KATE McPHERSON: Has the devaluation of the Fiji dollar by 20% affected the credit rating?
STEVEN HESS: Well, no. Strictly from a credit rating point of view, that could be viewed as a positive because it may help to reduce the balance of payments deficit by making imports more expensive and their exports cheaper and more attractive therefore to buyers.
