Standard & Poor's Ratings Services said today that it raised its long-term foreign currency sovereign credit ratings on the Dominican Republic to 'B' from 'SD'. Standard & Poor's also raised its short-term foreign currency sovereign credit rating on the republic to 'B' from 'SD'.
The long-term local currency sovereign credit rating was raised to 'B' from 'CC', the short-term local currency sovereign credit rating to 'B' from 'C'. The outlook on the local currency ratings is stable. Standard & Poor's also assigned its 'B' senior unsecured debt rating to Dominican Republic's two global bonds (a 9.5% bond due in 2011 and a 9.04% bond due 2018, together totaling $1.1 billion) that were issued as part of the recent restructuring.
According to Standard & Poor's credit analyst Richard Francis, the upgrade of the Dominican Republic's ratings were prompted by the successful restructuring of the government's commercial bank loans and bonded debt. "A
sustained fiscal adjustment and improved expectations following this reprofiling of scheduled amortization will likely boost domestic confidence," said Mr. Francis. "This, in turn, could enable the government to achieve its robust growth projections of 4% per annum for several years beginning in 2006.
The result will be a lowering of the already-moderate general government debt burden, projected at about 50% of GDP (including recapitalization costs of public sector financial enterprises) at year-end 2005," he added. The Dominican Republic is exiting default with the highest rating ever assigned a sovereign previously rated 'SD'. Other post-default sovereign ratings have ranged between 'B-' and 'CCC+'.
"Despite recent improvements, a number of challenges remain," noted Mr. Francis. "Monetary policy remains constrained by quasi-fiscal losses at the central bank. Political policy is constrained by weak, albeit improving,
governance and the need for the executive to reach agreement with an opposition-controlled Congress," he concluded.