Fitch affirms Aruba

Fitch Ratings said it affirmed its long-term foreign and local currency ratings of BBB for Aruba. The outlook is negative.

The negative outlook was assigned last year in light of steady fiscal deterioration and rising government debt. General government debt has risen to 42.3% at the end of 2003 from 28.5% of GDP in 2000, although the repayment of external contingent liabilities accounted for nearly 40% of the increase and was resourcefully handled by the government, according to Fitch.

Over the past year, the government has made some progress in laying the groundwork for future fiscal consolidation. However more still remains to be done to contain expenditure growth and reduce general government arrears to suppliers and domestic agencies, which stood at 8.3% of GDP at the end of 2003.

While Fitch said it expects the recent rise in public debt to level off given the boost to government revenues provided by renewed economic growth, the slow pace of fiscal consolidation is a concern given the narrow base of the economy and the vulnerability of government revenues to cyclical downturns and external shocks.

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