BULGARIA has been given its first investment-grade rating, which was awarded on June 24 by Standard&Poor's (S&P).
The leading private ratings agency upgraded the country's credit rating to BBB with a stable outlook, touted Bulgarian Deputy Foreign Minister Ilia Lingorski.
Bulgaria's foreign currency sovereign credit ratings have been raised to BBB-/A-3 from BB+/B, and its local currency sovereign credit ratings to BBB/A-3 from BBB-/A-3.
The upgrade reflects the country's bright economic prospects and prudent fiscal policies, S&P said in a press release. The economic outlook is stable.
Bulgaria is the tenth sovereign currently rated by S&P that has made the transition to investment grade from speculative grade, the agency also said.
Bulgaria's improved creditworthiness is supported by its high growth potential, prudent fiscal policies, and European integration, which is likely to lead to EU membership in 2007. "The integration process will culminate in Bulgaria joining the European Monetary Union (EMU), most likely in 2010," said S&P's credit analyst Moritz Kraemer, quoted in the press release.
The country's prospects are underpinned by it's competitiveness and political commitment to prudent macroeconomic policies.
Prudent fiscal policies are expected to survive the election, irrespective of the composition of the next government, because of the policy constraints imposed by Bulgaria's monetary regime are well understood in all political camps. General government debt is expected to fall further to 33 per cent of GDP in 2007, from 80 per cent as recently as 2000.
The agency cautioned that the country's ratings remain constrained by a relatively low level of development and weak external liquidity. The central bank has more than doubled foreign exchange reserves since 2001, to an estimated $7.5 billion by year-end 2004, but about one-half of this sum is needed to back the currency board.
The current account deficit may become a serious concern if foreign direct investment were to falter. Currently, about 80 per cent of the current account deficit is covered by net foreign direct investment FDI.
"Further rating improvements will hinge on sustaining a cautious policy mix, compatible with Bulgaria's monetary regime and smooth convergence toward EU accession," Kraemer said.
Lingorski said the Government's active policy for management of the external debt is the main reason for the award of the investment-grade credit.
In another development on June 24, S&P affirmed its BB long-term foreign and local currency issuer credit ratings on the City of Sofia. The agency's analysis shows that the city faces high infrastructure needs.
The municipality's loan agreements with the Japan Bank for International Cooperation and the European Bank for Reconstruction and Development to finance the extension of the underground network and the renewal of its bus and tram fleets will increase the municipality's debt, but its favourable profile will mitigate the risks. The long maturity and the depreciation should make possible a debt service level of less than 6 per cent of total revenues, S&P said.
The agency expects the issue of the incumbent mayor's suspension will be resolved shortly, and stresses that this has been factored into the rating.
S&P's forecasts a balanced budget for 2004 for Sofia and financial stabilisation in 2005 due to the expected improvement of relations between central and local government.
The leading private ratings agency upgraded the country's credit rating to BBB with a stable outlook, touted Bulgarian Deputy Foreign Minister Ilia Lingorski.
Bulgaria's foreign currency sovereign credit ratings have been raised to BBB-/A-3 from BB+/B, and its local currency sovereign credit ratings to BBB/A-3 from BBB-/A-3.
The upgrade reflects the country's bright economic prospects and prudent fiscal policies, S&P said in a press release. The economic outlook is stable.
Bulgaria is the tenth sovereign currently rated by S&P that has made the transition to investment grade from speculative grade, the agency also said.
Bulgaria's improved creditworthiness is supported by its high growth potential, prudent fiscal policies, and European integration, which is likely to lead to EU membership in 2007. "The integration process will culminate in Bulgaria joining the European Monetary Union (EMU), most likely in 2010," said S&P's credit analyst Moritz Kraemer, quoted in the press release.
The country's prospects are underpinned by it's competitiveness and political commitment to prudent macroeconomic policies.
Prudent fiscal policies are expected to survive the election, irrespective of the composition of the next government, because of the policy constraints imposed by Bulgaria's monetary regime are well understood in all political camps. General government debt is expected to fall further to 33 per cent of GDP in 2007, from 80 per cent as recently as 2000.
The agency cautioned that the country's ratings remain constrained by a relatively low level of development and weak external liquidity. The central bank has more than doubled foreign exchange reserves since 2001, to an estimated $7.5 billion by year-end 2004, but about one-half of this sum is needed to back the currency board.
The current account deficit may become a serious concern if foreign direct investment were to falter. Currently, about 80 per cent of the current account deficit is covered by net foreign direct investment FDI.
"Further rating improvements will hinge on sustaining a cautious policy mix, compatible with Bulgaria's monetary regime and smooth convergence toward EU accession," Kraemer said.
Lingorski said the Government's active policy for management of the external debt is the main reason for the award of the investment-grade credit.
In another development on June 24, S&P affirmed its BB long-term foreign and local currency issuer credit ratings on the City of Sofia. The agency's analysis shows that the city faces high infrastructure needs.
The municipality's loan agreements with the Japan Bank for International Cooperation and the European Bank for Reconstruction and Development to finance the extension of the underground network and the renewal of its bus and tram fleets will increase the municipality's debt, but its favourable profile will mitigate the risks. The long maturity and the depreciation should make possible a debt service level of less than 6 per cent of total revenues, S&P said.
The agency expects the issue of the incumbent mayor's suspension will be resolved shortly, and stresses that this has been factored into the rating.
S&P's forecasts a balanced budget for 2004 for Sofia and financial stabilisation in 2005 due to the expected improvement of relations between central and local government.
