The risk rating agency Moody’s raised Argentina’s credit rating, where the local currency went to B3 (highly speculative investment) and the foreign currency to Caa1 (substantial risk) due to its “predictability” and “consistency”, as reported by the entity this Wednesday.
“The decision to increase the local and foreign currency ceilings reflects an increase in the predictability and great consistency of economic measures that led to a rapid reduction of monetary and fiscal imbalances that were being fueled by very high inflation,” Moody’s said in a statement.
“The Government’s measures to lift restrictions on cross-border payments and currency convertibility have increased the availability of liquidity in foreign currency in the country, despite the low openness of the capital account,” the text added.
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Furthermore, he highlighted that “the Government’s policy has shifted towards a reduction in the role of the State within the economy and the reduction of interventionist measures suggests a lower probability of transfer and convertibility risks in the event of a default.”
Argentina must face this Thursday the first of the debt maturities scheduled for this year, when it must disburse some 4,341 million dollars, corresponding to bonds restructured in 2020 by the administration of Alberto Fernández (2019-2023), which includes both capital and interest .
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With a country risk of 572 basis points, the lowest level since August 2018, Argentina is expected to meet its obligations without problems and enhance the optimism of private investors.
Moody’s considered that a better rating in local currency portends greater predictability in government actions and even less intervention in the economy and the financial system, in the face of “weak stability in the external balance of payments.”
“The one-step gap between the foreign currency ceiling and the local currency ceiling reflects greater policy effectiveness and relatively low external debt, balanced by low capital account openness,” the US agency concluded.
With information from EFE
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