Moody's Upgrades Russia's Country Ceiling and Eurobonds to Ba2 from Ba3 With Other Instruments Also Upgraded
Dec 19, 2002
London, 17 December 2002 -- Moody's Investors Service has upgraded the foreign currency country ceiling for Russia and the government's outstanding foreign currency eurobonds to Ba2 from Ba3. The country ceiling generally acts as an upper limit for the ratings that can be assigned to the foreign currency obligations of other entities domiciled in the country, but can be occasionally pierced by corporate issuers.
The rating agency also upgraded the foreign currency bank deposit ceiling to Ba3 from B1, the sixth and seventh tranches of Ministry of Finance bonds (MinFins) to Ba3 from B1, and the fifth tranche of MinFins to B1 from B3. The outlook for all of the ratings remains stable.
Moody's said its actions were prompted by several years of strong economic growth that has improved many of Russia's key economic indicators, including a current account surplus that is extremely large, and a fiscal position that has gone from weak to strong.
The nation's debt ratios have improved dramatically and external vulnerability ratios have strengthened due to an impressive growth of foreign currency reserves and a sharp drop in external short-term debt, said Moody's. Some debt obligations have been prepaid, and resources have been set aside to help deal with debt servicing peaks in 2003 and 2005.
Moody's noted, however, that Russia is still burdened by high debt service with the key ratio of total debt service to federal budget revenues still above what it was before the country's 1998 debt crisis. Rates of investment and growth have also declined while the current account and budget revenues have been strained by currency appreciation, volatile oil and gas prices, and the expansion of public sector wages and employment. Together, these factors have also reduced the federal surplus.
Planned structural reforms in the crucial areas of banking, natural monopolies, and civil service are likely to encounter resistance, said Moody's, which added that Russia has a long history of central government initiatives that are resisted or undermined at the local level.
The rating agency also upgraded the foreign currency bank deposit ceiling to Ba3 from B1, the sixth and seventh tranches of Ministry of Finance bonds (MinFins) to Ba3 from B1, and the fifth tranche of MinFins to B1 from B3. The outlook for all of the ratings remains stable.
Moody's said its actions were prompted by several years of strong economic growth that has improved many of Russia's key economic indicators, including a current account surplus that is extremely large, and a fiscal position that has gone from weak to strong.
The nation's debt ratios have improved dramatically and external vulnerability ratios have strengthened due to an impressive growth of foreign currency reserves and a sharp drop in external short-term debt, said Moody's. Some debt obligations have been prepaid, and resources have been set aside to help deal with debt servicing peaks in 2003 and 2005.
Moody's noted, however, that Russia is still burdened by high debt service with the key ratio of total debt service to federal budget revenues still above what it was before the country's 1998 debt crisis. Rates of investment and growth have also declined while the current account and budget revenues have been strained by currency appreciation, volatile oil and gas prices, and the expansion of public sector wages and employment. Together, these factors have also reduced the federal surplus.
Planned structural reforms in the crucial areas of banking, natural monopolies, and civil service are likely to encounter resistance, said Moody's, which added that Russia has a long history of central government initiatives that are resisted or undermined at the local level.