Barbados' policy challenges include high general government debt, deficits, and debt servicing requirements; limited appetite for private-sector financing; and a low level of international reserves raising the risk to sustainability of the peg to the U.S. dollar. The consideration of a debt-liability management exercise to alleviate near-term debt service on intragovernment holdings of local currency debt highlights higher fiscal stress, and with it, in our view, the risk of an exchange with private creditors that we could consider distressed. We are lowering our long-term local currency rating on Barbados to 'CCC' from 'CCC+'. We are affirming our other ratings on Barbados, including the 'CCC+' long-term foreign currency sovereign rating. The negative outlook reflects the risk of a downgrade given difficulty
