International credit ratings agency Moody’s has revised Trinidad and Tobago’s outlook from stable to negative, citing short-term risks linked to declining official foreign exchange reserves.
The decision marks the second time in three months that a major international ratings agency has shifted the country’s outlook to negative. However, Finance Minister Davendranath Tancoo has questioned the timing of the move, arguing that the agency acted too early, before recently introduced government measures had sufficient time to take effect.
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In its assessment released yesterday, Moody’s said the revision reflected heightened short-term downside risks, particularly a reduction in the Central Bank’s liquid foreign exchange reserves. Under Moody’s methodology, these reserves exclude assets held in the Heritage and Stabilization Fund.
According to the Central Bank’s most recent data, Trinidad and Tobago’s net official reserves stood at US four point six billion dollars at the end of October, equivalent to five point four months of import cover. Net official reserves represent the foreign currency available to support the national currency, finance imports, and meet government foreign obligations.
Despite the outlook change, Moody’s maintained the country’s long-term local and foreign currency issuer ratings and senior unsecured ratings at Ba2. The agency noted that the rating continues to reflect Trinidad and Tobago’s strong credit fundamentals, including substantial fiscal buffers, such as the Heritage and Stabilization Fund and cash equivalent assets totaling approximately 45% of the gross domestic product. Moody’s also cited expected increases in oil and gas production by 2027 as a positive factor.
In a statement issued by the Ministry of Finance, Tancoo said the government had anticipated the affirmation of the Ba2 rating but expressed disappointment with the outlook revision.
“While our credit rating was maintained as expected, my only recommendation was that Moody’s should have allowed a few more months to assess the impact of recently implemented government strategies. These measures form part of a comprehensive policy agenda aimed at rebalancing growth, revitalizing the economy, securing a sustainable fiscal path, and stabilizing foreign exchange reserves,” Tancoo said.
He added that adjusting the outlook in December, before the measures could influence fiscal outcomes in the 2026 fiscal year, was premature in the government’s view.
Tancoo also criticized what he described as Moody’s narrow definition of foreign exchange reserves.
“The decline in Moody’s narrow measure of foreign exchange reserves was the main contributor to the negative outlook. Their definition excludes gold and Special Drawing Rights and more critically ignores significant foreign currency assets managed by other economic agents,” he said.
He pointed out that Trinidad and Tobago’s net international investment position currently stands at a surplus of approximately US seven point five billion dollars, meaning the country holds more foreign currency assets than liabilities.
“This underscores our foreign currency resilience and demonstrates that on a net debt to GDP basis, Trinidad and Tobago performs better than many countries in Latin America and the Caribbean,” Tancoo stated.
He expressed confidence that prudent management of foreign exchange resources, combined with the government’s new macro fiscal framework, would strengthen economic resilience and support a return to a stable outlook in the near future, with the aim of securing future rating upgrades.
Moody’s last affirmed Trinidad and Tobago’s Ba2 rating with a stable outlook in December of the previous year, citing the country’s return to sustained economic growth driven largely by the non energy sector. At that time, the agency also flagged concerns about declining foreign exchange reserves earlier in 2024 due to reduced energy revenues amid falling natural gas prices.
In September, Standard and Poor’s affirmed Trinidad and Tobago’s investment grade rating at BBB while revising its outlook from stable to negative. The agency highlighted the country’s strong democratic institutions, economic stability, and favorable external position, supported in part by assets in the Heritage and Stabilization Fund. However, it also signaled the need for reforms to strengthen fiscal sustainability and enhance economic diversification.
Standard and Poor’s indicated that the outlook could return to stable within the next twenty four months if government policies improve long term growth prospects, bolster fiscal sustainability, and maintain the country’s external buffers.
