YEREVAN (Arka.am) — The Standard & Poor’s credit rating agency will publish the first sovereign ratings of Armenia from September 25 to October 10, 2021, the Central Bank of Armenia told ARKA news agency.
It emerged on August 3 that the Armenian Ministry of Finance and the Standard & Poor’s signed an agreement, whereby the S&P will be awarding Armenia sovereign ratings. To date, Armenia’s credit ratings have been awarded by international rating agencies Fitch and Moody’s.
According to the Central Bank of Armenia, the agreement with Standard & Poor’s means that another international organization will be issuing objective assessments of Armenia’s macroeconomic situation and risks, the flexibility of the existing institutions and the effectiveness of their policies.
This will definitely help the country win the trust of institutional investors and will also have a positive effect on the yield of Armenian Eurobonds that will be issued in the future.
According to the Central Bank, cooperation with Standard & Poor’s will contribute to the development of Armenia’s capital market and accelerate the reform process in this area. The country’s sovereign rating is also important for private sector companies to also seek S&P’s ratings for entering the local and international capital markets.
The sovereign ratings awarded by Standard & Poor’s will reduce the costs of private companies in obtaining their own ratings, since in the absence of a sovereign rating, the price for private companies also includes an assessment of sovereign risks and, as a result, companies bear additional costs.
A sovereign rating from Standard & Poor’s will also make it possible for Armenia to develop, in cooperation with this organization, a national rating scale, based on the rich experience of Standard & Poor’s. This can become a new incentive for increasing business transparency and management standards in the country.
Having sovereign ratings from the three most reputable credit rating agencies (S&P, Moody’s and Fitch) has found wide application, regardless of the purpose for which they are important. In particular, almost all the countries in the region (Georgia, Russia, Turkey, Azerbaijan, Kazakhstan, Ukraine, Uzbekistan, Belarus, the Baltic countries) are awarded sovereign ratings by the three rating agencies.
Secondly, discussions with Standard & Poor’s experts showed that this agency is quite flexible in terms of rating the private sector and, especially, relatively small local companies.
In addition, if there is a sovereign rating, export-oriented companies operating in Armenia can count on a rating 3-4 levels higher than the country’s sovereign rating, which can become a significant incentive for local business.
Thirdly, the presence of three sovereign ratings in a country creates additional competition, and in these conditions, local companies get the opportunity to discuss the lowest rating price.
The agreement with S7P provides for awarding the government of Armenia monthly sovereign ratings on long-term and short-term bonds in national and foreign currency.
In the future, if necessary, it will award ratings to any bonds issued or guaranteed by the Armenian government and included in the national debt. According to the agreement, if necessary, Standard & Poor’s can also rate syndicated bank loans.
Standard & Poor’s is a rating agency traces its history back to 1860. It has rated over 100 countries with a total debt of $34 trillion. The agency has also established the S&P series of stock indices for the US and international securities markets.
On March 27, 2021, the Fitch Ratings affirmed Armenia’s long-term foreign currency Issuer Default Rating (IDR) at ‘B +’. The forecast is “Stable”.
On August 27, 2019, the Moody’s Investors Service raised the rating of the long-term issuer of unsecured debt obligations of the Armenian government in national and foreign currency and priority unsecured debt obligations from B1 to Ba3. Outlook was changed from Positive to Stable.