Thursday, October 14 2021 12:06
Naira Badalian

RA Minister of Economy did not rule out that Standard & Poor`s would assign credit rating to "Export Insurance Agency of Armenia" CJSC

RA Minister of Economy did not rule out that Standard & Poor`s would assign credit rating to "Export Insurance Agency of Armenia" CJSC

ArmInfo. For the first time, the "Big Three" international rating agencies Moody's Investors Service, Standard & Poor's and Fitch Ratings simultaneously published a report on Armenia. RA Minister of Finance Tigran Khachatryan stated this at  a government session on October 14.

Yesterday, the Central Bank of Armenia reported that for the first  time the Standard & Poor's rating agency assigned Armenia a sovereign  rating - "B +" on the issue of long-term obligations in foreign and  national currencies with a "Positive" forecast. The assignment of the  rating is dated October 12, 2021. In early September 2021, Moody's  confirmed Armenia's sovereign rating at Ba3, leaving the forecast  stable, expecting real GDP growth in 2021 by 4.5%. At the end of  September this year, Fitch Ratings has affirmed Armenia's long-term  foreign currency issuer default rating (IDR) at 'B +' with a stable  outlook, improving expectations for 2021 on GDP growth to 5.5% (from  the previous 3.2%).

The head of the Ministry of Finance noted that the sovereign rating  from Standard & Poor's in the future will allow, in cooperation with  this agency, to develop a national rating scale for Armenia, taking  into account the rich experience of Standard & Poor's in developing  such scales. This can become a new incentive for increasing the level  of transparency and business management in Armenia.

"Standard & Poors, in addition to the rating of the issue of  long-term obligations, also assigned a "B" rating to the issue of  short-term bonds in foreign and national currencies, and also  determined the country's assessment at "BB-" in terms of transfers  and convertibility", Khachatryan said. The latter exceeds the  country's sovereign rating by one level, due to which private sector  companies and financial institutions of Armenia, when rated by  Standard & Poor's, can receive a rating higher than the country's  sovereign rating (BB-) by one level.

The "positive" outlook for Armenia's sovereign rating reflects the  opinion of Standard & Poor's analysts that the risks aimed at  improving the state of the country's economy dominate and within the  next 12 months may lead to an increase in Armenia's sovereign rating.  Standard & Poor's analysts note that if their expectations of  economic growth in Armenia are justified over the next 2-3 years,  external vulnerability will decrease and the implementation of the  state budget will be more positive than expected, this will lead to  an improvement in the country's sovereign rating. Standard & Poors  expects the government's five-year program to lead to faster economic  growth and a reduction in external leverage.

The entry of the largest international Standard & Poor's rating  agency into Armenia means that the macroeconomic situation and risks  in the country are improving, the flexibility of existing  institutions is increasing, and another international body is  emerging that objectively evaluates the effectiveness of their  policies. This will definitely help to gain the confidence of  institutional investors and will have a positive impact on the yield  of Eurobonds placed in the future.

In addition, as the Minister explained, Armenia's cooperation with  Standard & Poor's will contribute to the development of the capital  market in the country and accelerate the reform process in this  direction, given that the sovereign rating was also obtained for  private sector companies in order to ensure the possibility of  assigning a rating to them and accessing local and international  capital markets. Obtaining Standard & Poor's sovereign rating will  reduce the costs of obtaining a rating for companies in the private  sector of Armenia, since in the absence of a sovereign rating; the  price for obtaining a rating by private companies also includes an  assessment of sovereign risk. This will allow private sector  organizations, including financial ones, both in Armenia and abroad,  to attract financial resources on the most favorable terms, he said.

The head of the RA Ministry of Finance stressed that Armenia's "B +"  sovereign rating is based on the assessments of Standard & Poor's  experts that, despite significant external pressure, the country  overcame the consequences of confrontation and military conflict  without endangering the country's economic stability. Standard &  Poors attributes this flexibility (confrontation) of the economy, at  least in part, to the concept of sound fiscal and monetary policies.  With the funds accumulated as a result of sound fiscal policy, the  authorities have provided significant assistance to the economy  affected by the coronavirus pandemic, while maintaining financial  stability in the country. In 2020, the Central Bank of Armenia also  helped to counter serious and synchronized shocks with its flexible   monetary policy.  RA Prime Minister Nikol Pashinyan recalled that  over the past three years, his government twice entered the  international capital market by issuing Eurobonds and "twice fixed  the historical minimum on interest rates." "At the same time, the  last time we carried out the tranche was in January of this year,  when we were going through a very difficult period, and nevertheless,  international investors trusted the potential of the RA government to  maintain macroeconomic stability and overcome the crisis. And in the  end they turned out to be right," he said.  To recall, on January 26,  2021, Armenia placed among international investors the 4th issue of  10-year debt securities in the amount of $ 750 million. The  established annual yield of the bonds of the 4th issue was lower than  the yield of the 3rd issue in the amount of $ 500 million - 3.875%  (the coupon rate was 3.6%) against 4.2% in 2019, 7.5% in 2015 the  amount of $ 500 million and 6.25% in 2013 (in the amount of $ 700  million with a maturity of 7 years. The securities were repaid by  September 30, 2020). According to the Bloomberg information system,  investor demand for Armenian debt securities in 2021 exceeded $ 2.5  billion. The initial target for the yield of Eurobonds to maturity in  February 2031 was 4.375-4.5% per annum. The main underwriters of the  4th tranche securities were: City Bank, J.P. Morgan Securities plc.   and HSBC Bank Plc.

According to the prime minister, the assessment of the rating  agencies is very important, since potential investors are guided by  them when making investment decisions.

Minister of Economy of the Republic of Armenia Vahan Kerobyan, in  turn, said that at present the government is in the process of  assigning a rating to the state "Export Insurance Agency of Armenia"  CJSC. The assignment of the credit rating will most likely be dealt  with by Standard & Poors, he noted.


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