Standard & Poor's has downgraded Jamaica's sovereign credit rating from B- to selective default in response to the Government’s debt exchange programme.
Selective default occurs when a borrower elects to delay the repayment of some of its financial obligations while fully honoring others.
Standard & Poor's says it sees the move by Jamaica as a default of its debt.
S&P has also lowered the country's ratings on bonds and government securities.
Under the National Debt Exchange launched this morning, the Government will be paying lower interest rates on local debt.
S&P says the ratings on bonds included in the proposed domestic debt exchange have been reduced to D while the ratings on government securities not included in the debt exchange programme have been lowered to CCC.
According to Standard & Poor’s, it will assign a new sovereign credit rating to the new bonds upon the completion of the debt exchange and the issuance of the new bonds.
The agency says while the debt exchange will result in an ease in short-term liquidity strains, a sustained improvement in the government's debt profile will take years because of structural economic weaknesses.
It estimates Jamaica's general government debt burden to remain high at above 115 per cent of gross domestic product in 2013.
The government is hoping that through the debt exchange and other measures it can reduce the national debt by about $17 billion each year up to 2020.