Standard & Poor's (S&P) credit rating agency upgraded the outlook on the credit rating of Sofia municipality from stable to positive, Sofia Mayor Boiko Borissov told reporters on March 5, as quoted by Dnevnik daily. The agency affirmed the city's rating at BB+.

S&P paid due credit to the municipality's strategic location, its strong economic growth and improving budget parameters. On the downside, the municipality is yet to strengthen its institutions, is still insufficiently flexible in regard to revenues and expenditures, and is prone to pressure from losing companies in municipal ownership.

The upgrade to a positive outlook is mainly attributed to the improvement of budget performance since 2006 onwards, after three years of deterioration. According to the preliminary financial report, operational profit was at 19 per cent of operational expenditures in 2007, whereas debt is kept at a relatively low level of 27 per cent of operational revenues, according to a S&P statement.

In addition, the Sofia municipality generates a quarter of Bulgaria's gross domestic product and attracts almost 60 per cent of foreign direct investments in Bulgaria. The unemployment rate in Sofia is at 2.4 per cent, more than three times lower compared to the average nine per cent for the country.

S&P also praised consistency in financial policy making, as well as the municipality's restored political stability, the report reads.

Borissov said that due to the credit rating upgrade last year, the Sofia Municipality saved 800 million euro in interest payments on loans. The mayor was positive that the S&P could upgrade the credit rating again before the end of the year.

Nevertheless, Borissov heeded S&P's criticism in regard to the municipality's credit policy. Loans contracted by Sofia municipality, therefore, will have a cap of eight per cent from total budget revenues. According to local legislation, a municipality can draw loans up to 25 per cent of its total revenues.