Reuters | Mon Jul 26, 2010 | 12:19pm IST
Moody’s Investors Service raised the rating on local currency debt to one notch below investment grade at "Ba1" with a positive outlook, citing improving public finances due to recent government reforms. "The upgrade … was prompted by the Indian government’s adoption of a medium-term fiscal consolidation strategy, which is supported by a broadening structural reform program," said Aninda Mitra, Moody’s vice president and lead sovereign analyst for India. India is set to lower its fiscal deficit to 5.5 percent of GDP for the current fiscal year that began in April from a revised 6.9 percent in the last fiscal year.
The upgrade narrowed the gap by a notch between the local currency debt and its foreign currency rating, which was kept at "Baa3′ — the lowest investment grade rating. The outlook on its foreign currency debt is stable. However, markets shrugged off the action on the eve of the RBI’s policy review though some analysts said it could be positive for capital flows once risk appetite picks up. "It is more a catching up as despite this upgrade India’s local currency rating is still in the speculative grade while S&P and Fitch already have it in the investment grade," said Anubhuti Sahay, an economist at Standard Chartered Bank in Mumbai.
BBC News | Tuesday, 13 July 2010 | 09:13 GMT
International ratings agency Moody’s has downgraded Portugal’s sovereign debt rating, citing worsening public finances and weak growth prospects. It cut the rating by two notches from the maximum AA2 to A1. And it said Portugal might need further austerity measures, as well as those already announced. The euro fell against the dollar and sterling but market reaction was muted. Rival agency Standard & Poor’s already rates Portugal two grades lower at A-. The downgrade means that the rating agency is losing confidence in the Portuguese government’s ability to meet its financial obligations.
A sovereign debt downgrade tends to make it more expensive for a government to raise money on the international markets. However, the bonds are still some way from the “junk” status suffered by Greece. The latest available figures show Portugal’s total government debt stood at roughly 77% of GDP at the end of 2009. This is quite similar to the numbers in countries such as France and Germany, two of Europe’s economic powerhouses. However, Portugal’s economy is significantly smaller in absolute terms and is not expected to revive any time soon. Continue reading