Liar, Liar, Pants on Fire!

“B” Does Not Mean Above Average - Standard & Poor’s is a world reputed Financial House based in London. A few weeks ago a “B” - Negative downgrade for the Republic of Seychelles was issued, the SPPF use their propaganda machine to fool the Public into believing that this is a good rating to achieve. It is not. In case Mr. Minister and Mr. President who control the Nation newspaper do not understand the meaning of the rating, let me explain it to the two gentlemen. It might help your propaganda machine to stop dishing out the dung and face reality sooner, rather than later, which might come with damaging consequences for us all here in Seychelles.

If you have a “B” rating, it means the Obligor (Seychelles) currently has the capacity to meet its financial commitments; however, it faces major uncertainties which could lead to the Obligor’s inadequate capacity to meet its financial commitments. In other words, you can pay your bills but the prospects of your continuing to do so look slim or dim.

When you add a Negative qualifier to a rating, it means you are likely to see a further downgrade to your rating. It is a warning from the Financial House issuing it. For Seychelles, this means to “B-” rating for it’s foreign exchange commitments. After that, if there is not a significant change in your situation, you will then go to “CCC” rating territory with the lowest rating a “CC”. Beyond that, you are in default. In the forex department, the Seychelles is now on the verge of a “CCC” rating the next time Standard & Poor’s rates our Country.

Standard & Poor’s has segmented the government’s ability to pay its Rupee debt from its forex debt because the Rupee is not convertible and there are, therefore, different risks of default associated with its Rupee debt compared to its forex debt. Standard & Poor’s is relatively confident that the Government has sufficient cash resources to cover its Rupee debt, since a B+ is one step below investment grade, though still in Junk Bond (High Risk) territory.

Standard & Poor’s is being cautious about the forex debt. But it does not look good. The SPPF will have to work real hard to stay out of a default rating.

The bottom line for Seychelles is that we will have to use even more scarce forex resources to pay our debt because the interest rate on the loans we get will be adjusted upwards to compensate for additional risk of lending to the Seychelles.

For SPPF, it just means that it will get harder and harder to live their lies in the mist of dire economic failure. It also means that whatever brilliant strategy they had to address the economic crisis in their “extra ordinary Economic Council meetings” has failed as well. But that will not stop the SPPF from pumping out more and more propaganda to tell us we are successful. The crisis is just a figment of our imagination and Standard & Poor’s do not know how to count, in spite of our down-graded rating, the “B” is still Above Average. To hell with Standard... he is Poor!