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Fitch Ratings Ltd. raised Azerbaijan’s credit ratings to investment grade, citing an improved management of the country’s energy resources, which is helping it to bolster its public and external finances, Bloomberg reported.
The upgrade "reflects the rapid increase and prudent management of oil revenues that are being used to build a strong public and external net creditor position," said Andres Klaar, associate director at Fitch Sovereigns Group, in a statement on Thursday. "The strong sovereign balance sheet provides a powerful buffer against potential shocks emanating from the country’s structural weaknesses."
Fitch raised Azerbaijan’s long-term foreign and local currency issuer default ratings to BBB- from BB+. It also upgraded Azerbaijan’s country ceiling to BBB- from BB+ and raised its short-term foreign currency IDR to ‘F3’ from ‘B’. The sovereign rating is now investment grade.
Azerbaijan, which relies on oil revenue to generate more than a third of its economic output and more than 90 percent of exports, boasted a current account surplus of 20.7 percent of gross domestic product last year and inflation of 1.5 percent, according to Fitch.
"As an oil exporting country, virtually every external finance indicator in Azerbaijan is superior to the peer group median," Fitch said.
Still, Azerbaijan’s oil reserves will be depleted in about 18 years, compared with about 54 years in Kazakhstan, Fitch said.
"The relatively limited life span of the oil windfall underscores the importance of both prudent fiscal management and diversification of the economy," Fitch said. *