BULGARIA is a step closer to achieving the most prestigious investment state rating after London-based rating agency Standard & Poor's (S&P) increased its foreign debt rating to BB+ on May 22.
The agency's move was unexpected both by local and international analysts, who expected that a new rating statement would have been released only after the legal problems surrounding the privatisation of tobacco monopoly Bulgartabac and Bulgarian Telecommunications Company (BTC) were cleared away. The recent successful sell-off deal of the last state-owned bank DSK to Hungary's OTP Bank, and the continued reduction of the public debt-to-GDP ratio, were the main reasons cited by the agency for upping Bulgaria's credit rating.
S&P's latest monthly report, issued before the rating change, said: "Successful privatisation of BTC and DSK Bank in our view may have a positive impact on the Bulgarian sovereign rating. They would bring at least 500 million euro foreign investments in the country by the end of the year and would make the total score of completed landmark privatisation deals two out of three.
"However, if the privatisation of BTC fails, the overall score will be one out of three and a rating upgrade would look less probable though still possible given the debt ratios and the steady rate of GDP growth."
The agency's executive director for Central and Eastern Europe, Konrad Reuss, told Radio Liberty that Bulgaria clearly was making an effort to maintain the tempo of economic reform in order to join the EU in 2007, which justified Standard & Poor's to qualify the investment climate in Bulgaria as stable rather than positive.
"EU accession will also play a key role for upgrading Bulgaria's foreign currency ceiling to an investment grade," S&P said after it increased the rating.
"The Government aims to close all EU accession chapters by the end of the year with a more realistic reserve target to close them by mid-2004. The act would undoubtedly bring at least one notch upgrade but on the other hand the rating agencies might take a more conservative approach conditioning informally the benchmark move to the investment grade upon the end of the accession talks, but it is also about a year from now."
Bulgaria's credit rating will not go up again, however, until Bulgartabac and BTC are privatised, analysts predicted. They also expect a one-notch upgrade by Fitch in short-terms and a possible two-notch upgrade by Moody's to catch up with the other agencies. The moves would be driven mainly by the bank sector privatisation and the rapid fall in the public debt relative to GDP. Fitch last updated Bulgaria's credit rating by one notch in October 2002. Moody's last raised its rating in December 2001, and improved the outlook on Bulgaria to positive from stable in December 2002.
The agency also increased Bulgaria's long term local currency rating to BBB-, the lowest investment grade rating.
The agency's move was unexpected both by local and international analysts, who expected that a new rating statement would have been released only after the legal problems surrounding the privatisation of tobacco monopoly Bulgartabac and Bulgarian Telecommunications Company (BTC) were cleared away. The recent successful sell-off deal of the last state-owned bank DSK to Hungary's OTP Bank, and the continued reduction of the public debt-to-GDP ratio, were the main reasons cited by the agency for upping Bulgaria's credit rating.
S&P's latest monthly report, issued before the rating change, said: "Successful privatisation of BTC and DSK Bank in our view may have a positive impact on the Bulgarian sovereign rating. They would bring at least 500 million euro foreign investments in the country by the end of the year and would make the total score of completed landmark privatisation deals two out of three.
"However, if the privatisation of BTC fails, the overall score will be one out of three and a rating upgrade would look less probable though still possible given the debt ratios and the steady rate of GDP growth."
The agency's executive director for Central and Eastern Europe, Konrad Reuss, told Radio Liberty that Bulgaria clearly was making an effort to maintain the tempo of economic reform in order to join the EU in 2007, which justified Standard & Poor's to qualify the investment climate in Bulgaria as stable rather than positive.
"EU accession will also play a key role for upgrading Bulgaria's foreign currency ceiling to an investment grade," S&P said after it increased the rating.
"The Government aims to close all EU accession chapters by the end of the year with a more realistic reserve target to close them by mid-2004. The act would undoubtedly bring at least one notch upgrade but on the other hand the rating agencies might take a more conservative approach conditioning informally the benchmark move to the investment grade upon the end of the accession talks, but it is also about a year from now."
Bulgaria's credit rating will not go up again, however, until Bulgartabac and BTC are privatised, analysts predicted. They also expect a one-notch upgrade by Fitch in short-terms and a possible two-notch upgrade by Moody's to catch up with the other agencies. The moves would be driven mainly by the bank sector privatisation and the rapid fall in the public debt relative to GDP. Fitch last updated Bulgaria's credit rating by one notch in October 2002. Moody's last raised its rating in December 2001, and improved the outlook on Bulgaria to positive from stable in December 2002.
The agency also increased Bulgaria's long term local currency rating to BBB-, the lowest investment grade rating.
