Fitch Affirms Jamaica's Ratings.

NEW YORK -- Fitch Ratings today affirmed Jamaica's ratings and the Stable Outlook as follows:

--Foreign and local currency Issuer Default Ratings (IDRs) 'B+';

--Country ceiling 'BB-';

--Bond obligations 'B+/RR4'.

Jamaica's ratings are supported by its political stability, and a debt service record that is better than those of many rating peers. The rating also incorporates the institutional strengths of the country that have allowed it to service its crushing debt burden even during periods of extreme financial stress, such as that seen in 2002/03. The general consensus between the two leading political parties over the main thrust of economic policy is also a relative strength. In spite of meager growth in recent years and continued high levels of poverty - in contrast with the trend seen in some Latin countries - both parties appear to favor relatively orthodox policy framework.

On the other hand, Fitch cautions that fiscal pressures have been mounting, while the high level of Jamaica's current account deficits leave it vulnerable to external shocks - such as the current unfavorable external environment. Already, the Jamaican dollar has faced downward pressures in the last two months, while the central bank has lost over USD300 million in foreign reserves since the beginning of this year. Although the central bank has tightened its monetary policy in response, it is too early to judge to what extent this will permanently stabilize the FX market, especially, given uncertainty regarding the length and depth of the turmoil in the international credit markets. Jamaica's creditworthiness could come under pressure if the government fails to respond adequately by tightening its monetary and fiscal policies should further depreciation pressures continue. A significant depreciation could lead to higher inflation, lower growth and higher debt servicing costs, taking its toll on public debt dynamics. Similarly, reversal in the public debt trajectory, failure of the new government to present a budget that entails a credible fiscal consolidation, and/or significant reduction in international reserves that limits the maneuverability of the central bank to respond to external shocks could place downward pressure on Jamaica's sovereign creditworthiness.

'While the authorities continue to run significant primary surpluses, Fitch cautions that the persistent failure to achieve fiscal targets in recent years could eventually undermine hard-won fiscal credibility,' said Shelly Shetty, Senior Director in Fitch's Sovereign Group. Already, Jamaica's fiscal solvency ratios such as a public debt burden of 130% of GDP and interest (% revenues) of over 40% are significantly above the 'B' median. To a great degree, public finances remain vulnerable to external and weather-related shocks. In light of this vulnerability, together with a heavy debt burden and a high current account deficit, Fitch believes it will be important for the PM Golding-led government to redouble its efforts to tighten fiscal policy and move toward a balanced fiscal budget. This could prove to be more challenging given the new spending commitments of the Golding government as well as the additional costs that will be incurred due to Hurricane Dean, and Fitch believes it is quite likely that the government will miss its 2007/08 fiscal targets again.

Jamaica's other credit weaknesses include its high level of current account deficits as well as its relatively poor growth record. Fitch expects the current account deficits to remain large during its forecast period due to heavy investment in the tourism, mining and infrastructure sectors, but these should ultimately contribute to increasing the country's capacity to earn more foreign exchange. Moreover, Fitch is encouraged by the fact that a significant proportion of the current account deficit would be financed through FDI flows, limiting the increase in the country's external indebtedness. Similarly, while Hurricane Dean could undermine growth in this fiscal year, medium-term growth prospects appear more promising due to the above-mentioned investments.

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