SOFIA (AFP) – International ratings agency Standard and Poor’s upgraded Bulgaria’s debt yesterday and hailed the Bulgarian government’s policies of debt reduction and rigorous fiscal restraint. The rating on Bulgaria’s long-term debt in foreign currencies rose to BB-plus from BB and that of long-term debt in local currencies to BB-plus/B from BBB-minus/A-3, Standard and Poor’s said in a statement. The B rating on short-term debt in foreign currencies was left unchanged, the agency said. The new ratings reflect a stable outlook, it said. Standard and Poor’s said the upgrade was justified by a continuous reduction in Bulgaria’s public debt, an improvement in liquidity and the credibility over time in the government’s fiscal policy. Significant gains in productivity and competitiveness have contributed to a sharp rise in exports, which coupled with a strong rise in investment have allowed Bulgaria to deliver one of the best economic performances in Europe, S&P credit analyst Helena Hessel said. The agency noted that the ratings remain affected by reform challenges, particularly in the areas of privatization and corporate governance, inefficiencies in the energy sector as well as property regulation. Also underlined was the damage to the government’s popularity in recent months due to widespread low incomes and high unemployment, which could affect the state policies in the runup to municipal elections in October. At the end of 2002, Bulgaria’s public debt reached 9.3 billion euros, or 56 percent of gross domestic product (GDP). According to a plan adopted by the government in March, public debt should decrease to 52 percent of GDP this year before falling to 40 percent by 2006. The debt-management strategy has been approved by the International Monetary Fund and is based on an average economic growth estimate of 5 percent between now and 2006. Bulgaria, which hopes to join the European Union in the next wave of enlargement planned for 2007, plans to reduce the percentage of its debt held in dollars to 30 percent by 2009 from the current level of 56 percent, while increasing the amount held in euros.