Fitch Ratings, the international rating agency, upgraded Bulgaria’s long-term foreign currency rating to BBB- from BB+, and the long-term domestic rating to BBB from BBB, Finance Minister Milen Velchev told an extraordinary news conference on August 4. The outlooks on both ratings, which had been positive since July 2003, are now considered as “stable”. The short-term rating has been upgraded to F3 from B, and the country ceiling is also raised to BBB- from BB+, Fitch said on its web site. This was the second time this year that the country’s credit rating was boosted. On June 24 Bulgaria’s Standard & Poor foreign currency sovereign credit rating was upgraded to BBB-/A-3 from BB+/B. Velchev described the 12-th country credit rating increase as “unprecedented in history”. This has not happened to Russia, China, Poland or any other transition or emerging fast country, he said. According to Velchev, this categorically proves the confidence of the credit agencies and the investor community in the Government and its’ policies. The improvement in sovereign creditworthiness is underpinned by Bulgaria’s sound fiscal policy, and advances made on key structural reforms. Tight budgets, together with progress on privatisation; especially the sale of Bulgarian Telecommunication Company, and solid economic growth, are delivering rapid reductions in the general government debt burden, the Fitch message also said. General government debt ended in 2003 at 46.2 per cent GDP, and Fitch forecasts an end-2004 level of 40.2 per cent of GDP. Tax cuts and possible political change after the 2005 elections could have some adverse impact on public finances, but Fitch judges these risks to be relatively small. A new two-year IMF programme, signed a few days later, will also help maintain policy discipline. The rating upgrade is further supported by progress on Bulgaria’s EU accession, Fitch also said. EU membership should also underpin foreign investment and promote continued economic convergence, helping to raise GDP per capita. As an EU member, Bulgaria will become eligible for sizeable structural funds, and access to balance of payments support. Gross external debt has increased in nominal terms, but this is sustained by strong GDP growth and robust export earnings, the Fitch message said. External liquidity is buoyant, underpinned by sizeable foreign reserves, limited short term external debt and a smoothed amortisation profile, according to the agency. The Bulgarian Investment Agency’s chairman Pavel Ezekiev said that the upgrading is expected to result in a visible increase of investment activity on the part of key strategic investors. This has been proved by the fact that foreign investments amounted to one billion dollars in the first six months of the year, he said, adding that forecasts about foreign investments of two billion dollars for the whole 2004 seem quite realistic. According to Ezekiev, the rating boost will attract a new type of investor, not active in Bulgaria before. The question is not about investors who come to Bulgaria because of the cheap labour and raw materials, but about ones that pursue long-term strategic interests, he said. Besides that, he said, the rating upgrade makes the investment environment more predictable, which reduces project financing costs and facilitates the implementation of more new projects. For the time being, the Government does not plan new deals with respect to foreign debt, Velchev said answering a question. Finance Ministry adviser Krassimir Katev said that the fiscal reserves are expected at between five to six billion leva by the year’s end, which is a three-fold increase compared to 2001.