Moody's Merges Nicaragua's
Foreign And Local Currency Tatings at B3
Moody's Investors Service today raised
Nicaragua's foreign currency government bond
rating to B3 from Caa1 and affirmed its
domestic currency bond rating at B3. The
outlook on the ratings is stable.
"The upgrade of the foreign currency bond
rating unifies that rating with its domestic
currency counterpart," said Moody's Vice
President Gabriel Torres. "This action
reflects our view that, with rare
exceptions, a government is equally likely
to default on its domestic and foreign
currency obligations."
The B3 rating, among Moody's lowest for a
rated sovereign nation, balances Nicaragua's
very weak economic position and continued
concerns about institutional stability with
improvements in the main debt metrics and
generally low fiscal deficits.
"Nicaragua's low economic development
remains a key long-term ratings constraint,"
said Torres. "In addition to a $1,100 GDP
per capita -- one of the lowest among all
rated countries -- further negative risk
factors include subdued long-term growth
prospects, and institutional concerns."
He said Nicaragua ranks low on international
governance and rule of law indicators. And
political polarization has increased in the
country in the run-up to next year's
presidential elections.
Supporting the government ratings are
improvements to the main debt metrics, a
result of international debt forgiveness.
Nicaragua's debt to GDP fell from over 130%
in 2003 to an estimated 45% this year.
Nicaragua's country ceilings for foreign
currency bonds and foreign currency deposits
have also been lifted to B2 from B3 and to
Caa1 from Caa2, respectively. Its Ba2 local
currency bond and Ba3 local currency bank
deposit ceilings were affirmed.
The last rating action on Nicaragua was
implemented on May 24 2006, when Moody's
upgraded Nicaragua's foreign currency bond
ceiling to B3 from Caa1.
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