Russia Long-Term Ratings Raised, Reflecting Fiscal Prudence and Economic Reform
Dec 06, 2002
NEW YORK (Standard & Poor's) Dec. 5, 2002--Standard & Poor's Ratings Services said today that it upgraded its long-term sovereign credit ratings on The Russian Federation. The long-term local currency sovereign credit rating was raised to 'BB+' from 'BB-'; the long-term foreign currency sovereign credit rating was raised to 'BB' from 'BB-'. The outlook on the long-term ratings remains stable. At the same time, Standard & Poor's affirmed its 'B' short-term local and foreign currency sovereign ratings on Russia.
The upgrades reflect a three-year-old political commitment to prudent policies that has provided financial predictability and increases the likelihood that Russia's responsible economic management will continue through future political transitions.
"Solidifying political support for fiscal prudence and continuously strengthening debt management are likely to preclude a return to sizeable deficits over the medium-term, even after oil prices decline," said Sovereign Analyst Helena Hessel. "Financial reserves (estimated at Russian ruble (Rbl) 198 billion (US$6 billion) by end-2002) provide flexibility for a financially demanding 2003," she added.
According to Mrs. Hessel, new management at the Russian Central Bank has led to some progress on the realization of crucially important banking reform. "Although the actual strengthening of the banking system will take time, pension fund development should support domestic savings going forward, thus strengthening the overall financial system," Mrs. Hessel noted. "Progress on the implementation of judicial and administrative reform has continued, although improvements to the functioning of the state and judicial apparatus continue to be modest," she said.
According to Standard & Poor's, its double-notch upgrade of Russia's long-term local currency rating is underpinned by dramatic, systemic improvement in Russia's tax system. "The federal government's ability to collect taxes has been greatly enhanced in recent years, reducing the default risk on small ruble debt," Mrs. Hessel said. "The 'BB+' local currency rating balances the government's stronger capacity to service ruble debt with a shallow domestic debt market, which was undermined by 1998 financial crisis. Consequently, the default risk on Russia's local and foreign currency debt is more closely linked than is the case in most other 'BB' rated sovereigns," she concluded.
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.
The upgrades reflect a three-year-old political commitment to prudent policies that has provided financial predictability and increases the likelihood that Russia's responsible economic management will continue through future political transitions.
"Solidifying political support for fiscal prudence and continuously strengthening debt management are likely to preclude a return to sizeable deficits over the medium-term, even after oil prices decline," said Sovereign Analyst Helena Hessel. "Financial reserves (estimated at Russian ruble (Rbl) 198 billion (US$6 billion) by end-2002) provide flexibility for a financially demanding 2003," she added.
According to Mrs. Hessel, new management at the Russian Central Bank has led to some progress on the realization of crucially important banking reform. "Although the actual strengthening of the banking system will take time, pension fund development should support domestic savings going forward, thus strengthening the overall financial system," Mrs. Hessel noted. "Progress on the implementation of judicial and administrative reform has continued, although improvements to the functioning of the state and judicial apparatus continue to be modest," she said.
According to Standard & Poor's, its double-notch upgrade of Russia's long-term local currency rating is underpinned by dramatic, systemic improvement in Russia's tax system. "The federal government's ability to collect taxes has been greatly enhanced in recent years, reducing the default risk on small ruble debt," Mrs. Hessel said. "The 'BB+' local currency rating balances the government's stronger capacity to service ruble debt with a shallow domestic debt market, which was undermined by 1998 financial crisis. Consequently, the default risk on Russia's local and foreign currency debt is more closely linked than is the case in most other 'BB' rated sovereigns," she concluded.
Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.