Armenia 'Ba2' rating balances low debt burden with modest development - Moody's

11.30.07

MUMBAI (Thomson Financial) - Moody's Investors Service said its stable outlook and 'Ba2' local and foreign currency debt rating on Armenia balances the low debt burden of the government and economy against the country's weak institutional capacity and modest level of economic development.

The ratings agency said Armenia's 'Baa3' foreign currency country ceiling rating for bonds are based on Moody's (nyse: MCO - news - people ) assessment of a low risk of payments moratorium in the event of a government bond default.

While Armenia's debt burden compares well with similarly rated countries, as a relatively poor nation in the process of transitioning to a market-based economy, its institutions are still relatively undeveloped, Moody's said.

Armenia's general government debt burden -- at about 17 pct of GDP and falling -- compares favourably with other 'Ba2'-rated countries. The terms of its debt are also very comfortable relative to its peers, Moody's said.

The country's double-digit growth continues, at one of the fastest rates registered in the world, reflecting the economy's small size, and the government's fiscal and monetary policies are prudent, Moody's said.

However, links between Armenia's political class and the business elite foster entrenched vested interests, while the level of financial intermediation remains low. There are also geopolitical uncertainties linked to the conflict in the Nagorno-Karabach region, Moody's said.

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