MOODY’S: ARMENIA’S LOW FISCAL DEFICITS AND MANAGEABLE GOVERNMENT DEBT FUNDAMENTAL ENHANCEMENTS TO ITS CREDITWORTHINESS

ARKA News Agency, Armenia
Dec 10 2007

YEREVAN, December 10. /ARKA/. Armenia’s low fiscal deficits and
manageable government debt are fundamental enhancements to its
creditworthiness, Moody’s international rating agency says in its
Credit Analysis.

The report says that a weak revenue base is the main fiscal risk,
although it is ameliorated by the very comfortable debt service
profile.

According to the report, Armenia’s government debt is equivalent to
just 17% of GDP and 85% of revenues in 2007. Interest payments consume
less than 2% of fiscal receipts. Almost all (90%) of the government’s
debt stock is external and foreign currency-denominated and has been
procured on particularly favorable terms (both cost and tenor).

In November 2007, Moody’s Investors Service confirmed Armenian
government’s Ba2 rate for local and foreign currency debt
obligations. This rating balances the low government and economy-wide
debt against the country’s weak institutional capacity and modest
level of economic development.

Moody’s assigns a Ba3 foreign currency ceiling for bank deposits to
the country, in line with its practice of maintaining a one-notch
differential with the government bond rating for sub-investment grade
sovereigns due to the relatively higher incidence of bank deposit
freezes in times of crisis. Armenia’s foreign currency country ceiling
is Baa3, based on the foreign currency government bond rating of Ba2
and the agency’s assessment of a low risk of a general moratorium in
the event of a sovereign default on foreign currency obligations.

On July 24, 2006, Moody’s gave sovereign rates to Armenia for the
first time.