S&P affirms Bosnias sovereign ratings at B+/B with stable outlook.

By bne IntelliNews December 20, 2010
International rating agency Standard & Poors (S&P) has affirmed its B+ long-term and B short-term sovereign credit ratings on Bosnia with a stable outlook, the agency said in a statement. At the same time, the agency has lowered the transfer and convertibility (T&C) Assessment to BB from BB+. The ratings affirmation reflects S&Ps expectations that despite the fact that no new government has been appointed after the October general elections, the future government will implement the agreed measures and reforms under the three-year USD 1.57bn stand-by agreement with the IMF. S&P considers that the successful implementation of the stand-by accord will create higher fiscal flexibility, the degree of which will be however strongly dependent on the full implementation of the agreed fiscal consolidation strategy. S&P expects Bosnias central government deficit to be reduced to 4% of GDP in 2010 from 5.6% in 2009 and to continue falling on the back of resumed economic growth. The stable outlook on Bosnias sovereign ratings balances the countrys medium- to long-term growth potential and reflects S&Ps expectation that it will adhere to the stand-by agreement, against a difficult budgetary situation, complex political structure and environment, and external and financial system vulnerabilities. The countrys creditworthiness could improve if Bosnia continues to progress with its structural budgetary consolidation, improves its institutional framework to accelerate EU integration, and implements growth-stimulating structural reforms. Conversely, the ratings could come under pressure should budgetary imbalances fail to comply with the conditions of the IMF accord. In addition, sustained deterioration in the asset quality of the banking system or prolonged delays in appointing a new government could also put downward pressure on the ratings, S&P concluded.

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