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S&P Negative on Russia’s Sovereign
Standard & Poor’s rating agency has reacted to Russia’s possible spending from its national prosperity fund by lowering the country’s sovereign credit rating outlook from stable to negative yesterday. It had warned of the move in advance. But the Finance Ministry issued a decree on October 21 allowing 40 percent of the fund to be placed in ruble instruments and the remaining 60 percent in foreign assets, following the same format the Central Bank uses for its foreign reserves. A government resolution of October 16 made it possible to place up to 100 percent of the fund in ruble instruments, and up to 80 percent of it in stocks and corporate bonds.
Russia’s sovereign rating was downgraded from positive to stable on September 19 in connection with the global financial crisis. "The outlook revision reflects the likelihood of a downgrade if costs to the Russian government of the bank rescue operations continue to increase, amid rising capital outflows as confidence in the financial system and the monetary regime declines," said S&P credit analyst Franklin Gill of the present change. In other words, the further use of state fund to support the economy, that is, the growth of anti-crisis expenses to more than 15 percent of the GDP, will lead to a cut in Russia’s credit rating.
Russia’s long-term foreign currency credit rating remains at BBB+, its long-term local currency at A- and its short-term sovereign credit rating at A-2. The risk for transferring and converting currency for non-sovereign Russian borrowers was lowered from A- to BBB+ due to possible government restrictions on access to money needed by Russian corporate borrowers. The national prosperity fund ($48.9 billion on October 1) and the reserve fund ($141 million) are part of Russia’s international reserves of $515.7 billion.
www.kommersant.com
All the Article in Russian as of Oct. 24, 2008
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Photo: Ivan Makeev
