8 Aug 2011

Fiji's credit rating upgraded

10:14 am on 8 August 2011

The credit rating agency Standard & Poor's has upgraded Fiji's long-term sovereign credit rating to B from B-.

The announcement effectively means the credit rating agency's outlook on Fiji's foreign currency rating has been revised from 'positive' to 'stable'.

The surprise revision was further boosted by the agency's optimistic projection that the economy will experience a 1.3 % growth in 2011, after contracting in three of the last four years.

S&P also affirmed Fiji's B local currency long-term rating and raised the foreign currency short-term ratings to B.

A statement released by S&P attributed the analysis to continued improvements to the country's external position.

S&P believes the Fiji situation will continue to improve, including in the level of foreign exchange reserves, supported by a continuing recovery in the tourism sector.

The agency says the country's present rating is due to Fiji's persistent fiscal and current account deficits and reduced growth prospects caused by political instability, low sugar production and crops and infrastructure flood damage.

A credit analyst, Kyran Curry, says the ratings may be raised if there are improvements in one of several areas, including strengthening Fiji's political institutions, improving donor relations, enhancing growth prospects through labour or marker reforms, or placing the government's debt trajectory on a steady downward slope.

However, he says Fiji's ratings could be lowered if political pressures intensify or if public finances and external imbalances worsen.