Repost: FITCH IBCA LOWERS RUSSIA'S FOREIGN CURRENCY RATING TO 'BB'
>
>ÿ Futures World News - June 05, 1998 11:38
>
>ÿ London-June 5-FWN--FITCH IBCA SAID TODAY IT HAS CUT Russia's
long-term foreign currency rating to 'BB' and placed it on RatingAlert
negative.
>
>ÿ The short-term foreign currency rating remains unchanged at 'B'.
The new rating applies to all senior unsecured sovereign debt issued
by the government of the Russian Federation and places a ceiling on
the long-term foreign currency rating of Russian issuers, the
international ratings agency said.
>
>ÿ "The bold and determined defense of the ruble by the Russian
authorities has diminished the immediate risk of a liquidity crisis.
Though Russia's vulnerability to rollover risk was previously
identified by the agency, the latest and third episode of financial
volatility since October 1997 has heightened this risk and influenced
the agency's decision to downgrade," Fitch IBCA said.
>
>ÿ Fitch noted if the Russian authorities implement the International
Monetary Fund (IMF)-supported package of expenditure cuts and
revenue-raising measures with the same determination shown in
defending the ruble, there will be a dramatic easing in the country's
fiscal crisis.
>
>ÿ But against the backdrop of the increased cost of domestic and
external public debt, lower world oil and commodity prices, and a
stalled economic recovery, the risk of slippage on the fiscal targets
agreed with the IMF is consequently greater. The assignment of a
RatingAlert negative to the lower rating of 'BB' reflects this concern.
>
>ÿ Fitch IBCA has identified three triggers for the lifting of the
rating alert:
>
>ÿ --Given the fragility of investor confidence in the Russian
government's capacity and willingness to tackle the fiscal crisis that
is the underlying cause of pressure on the ruble, the agency believes
that additional external financial support is still required despite
the recent recovery in confidence. A mechanism for providing the
Russian authorities with short-term external liquidity would shore up
confidence in the ruble and provide the government with the time it
needs to demonstrate that it is effectively implementing the
IMF-supported fiscal package.
>
>ÿ --Ministry of Finance treasury control of public spending must be
extended across all the federal government financed expenditure
programs and budgetary units, including the so-called Power Ministries
(Defense, Security, and Interior).
>
>ÿ --Decisive and public action must be taken against tax delinquents
in order to send a powerful signal that non- payment of taxes will no
longer be tolerated.
>
>ÿ A key judgement that underpins Fitch IBCA's sovereign rating is the
level of political support and access--unique among emerging
economies--that Russia enjoys from the international community, which
mitigates the underlying credit risk. The agency continues to stand by
that judgment in light of recent statements by President Clinton and
other Group of Seven leaders, Fitch IBCA noted.
>
-eom- |
