Fitch IBCA, the greatest rating agency in Europe, yesterday upgraded Romania’s rating concerning its long-term debt denominated both in foreign and domestic currency, which surprised the international financial market. Domestic analysts say Fitch IBCA has made the right decision, taking into account the fact that Romania no longer runs the risk of entering default, but foreign analysts are much more reluctant and display their surprise.
Fitch IBCA improved from “B-” to “B” Romania’s rating concerning long-term debt denominated in foreign and domestic currency. At the same time, the short-term foreign currency debt rating remained stable at “B.” The general prospect of Romania’s long-term rating is stable, according to a Fitch IBCA press release.
“We made the decision to improve the two ratings following a recent visit to Bucharest. The reason for which we have upgraded the rating is strictly connected to improvements posted by Romania in its foreign position and especially in its balance of payments, and has nothing to do with parliamentary and presidential elections to take place this month,” Fitch IBCA responsible for Romania Sharon Leech told Ziarul Financiar.
She explained that official reserves’ increase from 622 million dollars in June 1999 to 2.1 billion dollars at present proved to be a decisive factor in making the decision to modify the rating.
“It is easier now to keep under control foreign debt payments rescheduling, while the return on the international capital market proved to be a success,” Leech says. Helena Hessel, a manager with American rating agency Standard&Poors, told Ziarul Financiar that she was surprised by Fitch IBCA’s decision.
“I am totally surprised. I do not comment upon Fitch IBCA’s decision, but I do not think that the foreign currency reserve is a reason for changing the rating,” Hessel states.
Two months ago S&P changed the general outlook for Romania’s rating from negative to stable, maintaining though the “B-” rating for the long term debts in foreign and domestic currency.
“Romania still has big problems with restructuring and privatisation. Moreover, I do not remember S&P changing the rating of a country two weeks before elections,” Hessel added. Otherwise, Sharon Leech admits that Romania remains one of the countries vulnerable to “domestic and foreign shocks.”
“Loss-making companies and public utilities continue to dominate the economy, while limited progresses in the restructuring process and financial discipline gaps trigger substantial arrears.
She added that in the field of privatisation Romania was behind its neighbours, “and as long as the process of restructuring loss-making companies is not speeded-up, Romania will not reach the forecast potential.
Banca ?iriac chairman Anthony van der Heijden believes that this upgrade will restore investors’ confidence in Romania.”
“It can also open the foreign capital market for Romania, which is essential for country’s economic development,” Heijden stated.
However, he added that this upgrade should not be over-estimated, as the short-term debt rating remained unchanged and “this is the one that matters.”
“As we are currently planning to launch a foreign bond issue for ANL (Houses Agency), this upgrade is welcomed, because Romania has a more realistic stand to attract capital,” Florin Pogonaru, chairman of Creditanstalt Investmentbank Securities, stated.
“If the macroeconomic improvement continues and Romania’s rating will be further upgraded, it is essential for the Government resulted after elections to carry on the current achievements in the process of reform,” Sharon Leech said.