Moldova’s country ceiling is “B+”, which does not reflect significant constraints, as well as incentives for long-term lending to the country. This assessment of the country does not imply the introduction of capital controls or exchange controls that could make it significantly more difficult for the private sector to convert the national currency into foreign currency and transfer the proceeds to non-resident creditors to service debt obligations.
In its report, Fitch highlights several factors supporting Moldova’s rating. These include macro-financial stability and a moderate but rising level of public debt with a sustainable repayment profile, continued access to external financing and strong support from the EU and international partners. Sufficient external liquidity (reserves), prudent macroeconomic policies and a gradual return to economic growth are also noted.
Regional instability has created additional geopolitical risks for the country, Fitch said in the report, but alternative imports (of electricity) and increased domestic production (including from renewable energy sources) have helped Moldova avoid significant disruptions, in addition to rising electricity prices.
Fitch experts also see significant risks that domestic political developments could disrupt the country’s ongoing reorientation of its foreign policy towards the West. “Moldova’s parliamentary elections, scheduled for late September, carry a risk of external interference. However, the outcome of the elections and the process of government formation could also pose a risk of slowing down the EU integration process,” the report said.
Aggravating the foreign policy agenda are domestic factors: “a large structurally significant current account deficit and a high net external debt burden.”
The international agency’s proprietary rating model uses 18 variables based on three-year averages, including one year of the country’s development projections.
Read more in Friday’s edition of Logos Press
