One of the top independent providers of economic information has raised the Cayman Islands' ceiling for foreign currency bonds and notes from Aa3 or high grade to Aaa or exceptional, Financial Secretary Kenneth Jefferson announced at a recent session of the Legislative Assembly.
The Moody's rating defines the probability that a government would resort to limiting foreign currency outflows in the event of a government default.
"This country ceiling is based on Moody's assessment of a very low risk of a payments moratorium being declined by government," said Mr. Jefferson.
"In other words, Moody's expects a very low risk that the government will impose a limit on the foreign currency debt payments of a borrowing entity," he said.
The Aa3 rating places Cayman alongside the UK, US, Canada and Bermuda.
"The Cayman Islands' rebound from the devastation inflicted by Hurricane of Ivan in 2004 demonstrates the soundness of the government's Aa3 ration, which is the highest in the Caribbean," states the report.
"Despite some accumulation of public debt and a large external trade imbalance, the Cayman Islands' key public debt indicators remain favourable compared to its peers and relative to its own ability and willingness to meet obligations," it states.
Mr. Jefferson said the rating change resulted from a change in Moody's rating methodology last year which included raising the foreign currency country ceilings of approximately 70 countries. Of these countries, the Cayman Islands is among only three countries which had their ceilings upgraded to Aaa.
"The country ceiling is the highest rating obtainable for an issuer of long-term foreign currency-dominated bonds," he said.
Moody's advises that an Aaa country ceiling for foreign currency bonds and notes can be interpreted as "having the best and/or exceptional quality with the smallest of investment risk."
Now with the highest ceilings ratings on both short-term and long-term debt, Mr. Jefferson says both ceilings imply a superior ability for repayment, leading market positions in well-established industries such as offshore financial services, high rates of return, conservative capital structure, and well-established access to a range of financial markets.
Mr. Jefferson cited a number of positive macroeconomic and political factors that contributed to Cayman's current ratings.
These include the country's recovery efforts from the effects of Hurricane Ivan which boosted growth and investment and produced an exceptional surge in imports, the stable political environment, the ability to contain the level of public debt despite large reconstruction costs, fiscal prudence the absence of pressure on the currency board regime or the exchange rate.