Moody’s downgrades SVG, warns default risk has increased 

By Admin. Updated 9:04 p.m., Saturday, July 11, 2026, Atlantic Standard Time (GMT-4). 

International credit rating agency Moody’s Ratings has downgraded St Vincent and the Grenadines’ sovereign credit rating and assigned a negative outlook, warning that the country faces mounting financial pressures and an increased risk of a debt restructuring that could amount to a default under the agency’s criteria. 

In a ratings announcement issued on 30 June 2026, Moody’s lowered St Vincent and the Grenadines’ long-term local and foreign currency issuer ratings to Caa1 from B3, while changing the outlook from stable to negative. The agency also affirmed the country’s short-term Non-Prime ratings. 

According to Moody’s, the downgrade reflects intensifying government liquidity pressures, elevated financing needs and a rapidly rising public debt burden, which it said has become increasingly difficult for the country to manage given its small, undiversified economy and limited financing options. 

The agency said St Vincent and the Grenadines’ gross financing needs were estimated at around 18 per cent of gross domestic product (GDP) in 2025, exceeding the median for countries with similar ratings. It also noted that domestic financing sources have become increasingly concentrated, with commercial banks now holding more than 62 per cent of the country’s domestic debt, while trading in government bonds on the Eastern Caribbean Securities Exchange has effectively ceased since September 2024. 

Moody’s warned that the Government is exploring a debt swap to ease refinancing pressures. While such a transaction could help address short-term liquidity concerns, the agency cautioned that if it is structured in a way that imposes economic losses on private creditors, it could constitute a default under Moody’s definitions and lead to further rating downgrades. 

The ratings agency attributed the deterioration in the country’s fiscal position to several years of heavy capital expenditure, including the Kingstown Port Modernisation Project, infrastructure investments linked to tourism development, and spending associated with three major external shocks — the COVID-19 pandemic, the 2021 eruption of La Soufrière volcano and Hurricane Beryl in 2024. It noted that Beryl caused damage equivalent to about 22 per cent of GDP. 

Moody’s reported that the central government’s fiscal deficit widened to 13.7 per cent of GDP in 2024, driven by a sharp increase in capital expenditure, and projected that deficits would remain in double digits throughout 2025 and 2026. Although government revenue has improved alongside the recovery of the tourism sector, the agency said this has not been sufficient to offset spending levels. 

It projects that general government debt will rise from 90.6 per cent of GDP in 2023 to 103 per cent in 2025, before peaking at around 124 per cent of GDP by 2029, significantly higher than it had previously anticipated. 

The agency said the negative outlook reflects continuing downside risks, including the possibility that financing pressures could force a debt restructuring, weaker-than-expected fiscal consolidation or additional liabilities arising from the close relationship between the Government and the banking sector. 

However, Moody’s said the outlook could return to stable if the proposed debt swap is completed without imposing losses on creditors, the Government successfully implements its medium-term debt strategy, and the country’s fiscal position improves in line with expectations. Stronger-than-expected economic growth and faster fiscal consolidation could also support future improvements in the sovereign’s credit profile. 

Despite the downgrade, Moody’s noted that St Vincent and the Grenadines has not recorded a sovereign default on bonds or loans since 1983.

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