Standard&Poor's Raises Russia's Credit Ratings
Standard&Poor's has raised its rating of the credit-worthiness of the Russian Federation.
Jan 28, 2004
LONDON, January 28. Standard&Poor's has raised its rating of the credit-worthiness of the Russian Federation. The agency told Rosbalt that Russia's long-term credit rating for hard-currency obligations has been raised from BB to BB+, while that for obligations denominated in Russian rubles has been raised from áá+/B to ááá-/A-3. At the same time, Standard&Poor's confirmed its B rating for Russian short-term foreign-currency obligations and its ruAA+ rating for short-term ruble obligations. Its overall forecast for Russia remains 'stable.'
'The raised ratings reflect continuing rapid improvement in the indexes of government debt and external liquidity,' a Standard&Poor's credit analyst, Helen Hessel, said. "Credit surpluses since 2000 and high rates of economic growth have made it possible to cut the overall state debt to 38% of gross national product as of the end of 2003 (as compared with a figure of more than 110% at the end of 1999). Gold and foreign-currency reserves are almost double outstanding short-term foreign debt and almost four times the volume needed to meet internal financial requirements in 2004,' she said.
The raised ratings also reflect, a company statement said, Russia's balanced approach to managing its finances, in particular, the recent creation of a stabilization fund and other structural reforms that can be expected to result in better macroeconomic index figures, given relatively high prices for oil.
At the same time, the gaps that remain in Russia's economic reforms continue to depress the nation's rating, the statement said, citing problems in the legal, institutional and administrative spheres. 'Completing its planned reforms, the government can overcome these structural shortcomings, but it can do so no earlier than the midrange future and then only if the reforms are effectively implemented,' Hessel said. 'There is an evident risk that the high social cost of the reforms and resistance to them on the part of groups in the industrial and government sectors will slow the tempo of change,' she said.
The rating agency's analysts also pointed, in their statement, to the negative influence of the Russian economy's great dependence on its natural-resources sector, which has been the driving force in the nation's economic growth. It labeled improvements in political institutions and government as Russia's primary needs, arguing that political tension and uncertainty stand in the way of timely and effective implementation of reform.
Looking ahead, Hessel said: "Our forecast of stability reflects Standard&Poor's assessment that the reform process will continue. Effective implementation of further reforms is what is needed to increase Russia's economic flexibility and to rid it of the structural inadequacies that stand in the way of raising Russia's rating to investment grade. At the same time, short-term risks are minimal in view of the strong positions of the nation in terms of external liquidity and the great flexibility of the tax-budget system in the short-term."
'The raised ratings reflect continuing rapid improvement in the indexes of government debt and external liquidity,' a Standard&Poor's credit analyst, Helen Hessel, said. "Credit surpluses since 2000 and high rates of economic growth have made it possible to cut the overall state debt to 38% of gross national product as of the end of 2003 (as compared with a figure of more than 110% at the end of 1999). Gold and foreign-currency reserves are almost double outstanding short-term foreign debt and almost four times the volume needed to meet internal financial requirements in 2004,' she said.
The raised ratings also reflect, a company statement said, Russia's balanced approach to managing its finances, in particular, the recent creation of a stabilization fund and other structural reforms that can be expected to result in better macroeconomic index figures, given relatively high prices for oil.
At the same time, the gaps that remain in Russia's economic reforms continue to depress the nation's rating, the statement said, citing problems in the legal, institutional and administrative spheres. 'Completing its planned reforms, the government can overcome these structural shortcomings, but it can do so no earlier than the midrange future and then only if the reforms are effectively implemented,' Hessel said. 'There is an evident risk that the high social cost of the reforms and resistance to them on the part of groups in the industrial and government sectors will slow the tempo of change,' she said.
The rating agency's analysts also pointed, in their statement, to the negative influence of the Russian economy's great dependence on its natural-resources sector, which has been the driving force in the nation's economic growth. It labeled improvements in political institutions and government as Russia's primary needs, arguing that political tension and uncertainty stand in the way of timely and effective implementation of reform.
Looking ahead, Hessel said: "Our forecast of stability reflects Standard&Poor's assessment that the reform process will continue. Effective implementation of further reforms is what is needed to increase Russia's economic flexibility and to rid it of the structural inadequacies that stand in the way of raising Russia's rating to investment grade. At the same time, short-term risks are minimal in view of the strong positions of the nation in terms of external liquidity and the great flexibility of the tax-budget system in the short-term."