Upgrade for Bulgaria

LONDON/SOFIA (Reuters) – Ratings agency Moody’s raised Bulgaria to investment grade status yesterday, boosting its sovereign credit rating to Baa3 from Ba1 on the Balkan state’s fiscal improvements and EU accession prospects. Analysts had long expected the move, as Moody’s was alone among the world’s top three ratings agencies to keep the EU hopeful out of the ranks of investment-grade countries. Fitch and Standard and Poor’s pushed Bulgaria up to investment grade in 2004 and to BBB, a notch higher in the top-level debt stratum, last year. «The government’s financial position and the quality of its institutions have now reached a point where Bulgaria can be considered an investment-grade credit,» Moody’s said in a statement. Moody’s kept the outlook on all the ratings stable. It said Bulgaria had demonstrated commitment to fiscal consolidation and had rapid economic growth. Bulgaria is scrambling to improve its weak and graft-prone judiciary and make other changes before May, when the EU is expected to decide whether to grant it membership next January or give it another year to make reforms. But, on the fiscal side, Bulgaria has been a star pupil, running a budget surplus of 2.4 percent of GDP in 2004 and targeting 3.0 percent this year. It also recently pre-paid a large part of its outstanding debt to the IMF and World Bank and concluded the early buyback of high-interest Brady bonds last year in a multi-year deal worth $2.2 billion. The agency said foreign investment and export growth were strong, although the country of 7.8 million still faced risks from a current account deficit of about 15 percent of gross domestic product and strong credit growth. But it said the government and banking system now seemed robust enough to withstand shocks and Finance Minister Plamen Oresharski said the government would remain vigilant. «This is good news for Bulgaria,» he said in a statement. «We are carefully watching the external economic balances and will not allow instability or vulnerability to external shocks.»