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S&P confirms Russia's credit ratings

MOSCOW, July 19 (RIA Novosti) - The international ratings agency Standard and Poor's has confirmed Russia's long-term sovereign credit rating at BBB- for foreign currency, and at BBB for local currency.

Standard and Poor's also confirmed Russia's short-term national scale sovereign credit rating at A-3, with a stable outlook.

According to S&P analyst Helen Hessel, Russia's ratings take into account the low level of government debt and its good external liquidity situation, but also the significant level of political risk, which remains a key limiting factor for the rating.

"Thanks to the consistently high oil price and successful debt management, the budget and trade balance figures have continued to improve in 2005," said Hessel. "Nevertheless, tax and budget policy became less balanced and macroeconomic stability in Russia weakened due to slower growth and increased inflation."

Hessel said that the government's position as a net creditor has strengthened and that this trend will continue from 2006-2008, supported by high oil prices and savings due to early debt repayments to the Paris Club. Servicing of external debt during the next few years will remain very low, particularly considering the $40 billion, which will have accumulated in the stabilization fund by the end of 2005.

S&P believes that the political uncertainty and delays to the reform process seen in 2004 will continue for the next few years.

"Russia's annual growth of around 5%, despite being at a very acceptable level relative to international standards, is restricted due to many structural and political weaknesses."

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