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Fitch: Azerbaijan’s public finances stronger than ‘BB’ rated peers

25 February 2017 15:25 (UTC+04:00)
Fitch: Azerbaijan’s public finances stronger than ‘BB’ rated peers

By Trend

Azerbaijan’s public finances are stronger than ‘BB’ rated peers and surprised on the positive side in 2016, said a report of the international ratings agency Fitch Ratings posted on its website Feb. 25.

Fitch Ratings has affirmed Azerbaijan’s Long-Term Foreign and Local-Currency Issuer Default Ratings (IDR) at ‘BB+’. The issue rating on Azerbaijan's senior unsecured foreign-currency bond has also been affirmed at ‘BB+’.

The Country Ceiling has been affirmed at ‘BB+’. The Short-Term Foreign and Local-Currency IDRs have been affirmed at ‘B’.

Azerbaijan’s ‘BB+’ ratings balance a strong external balance sheet and low government debt, say Fitch experts.

“Despite a large fall in oil revenues in 2016, the consolidated general government deficit was contained at 1.2 percent of GDP, below the ‘BB’ median of 3.3 percent and below our previous forecast of 7.3 percent, mostly due to a 41 percent capital expenditure cut,” says the report.

“Fitch expects a one-off widening in the budget deficit to 8.4 percent of GDP in 2017, due to planned support through the budget from sovereign wealth fund SOFAZ to the banking sector, worth around 12 percent of GDP. Beyond 2017, the fiscal balance is expected to improve as oil prices recover,” according to the report. “Deficits are largely financed by ample assets accumulated in SOFAZ. Despite a decline in the USD value of assets in 2015-2016, they accounted for a comfortable 92 percent of GDP at end-2016 ($33.1 billion), were largely held in safe, liquid assets, and were reported much more transparently than in most higher-rated oil producers.”

Fitch experts say Azerbaijan’s government debt therefore remains contained at 22.5 percent of GDP at end-2016, much lower than the ‘BB’ median of 51.1 percent.

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