S&P revises Bosnia's rating outlook to negative on political problems.

By bne IntelliNews July 29, 2011
Standard & Poor's Rating Services revised its outlook on Bosnia's ratings to negative from stable on deteriorating political environment, the agency said in a statement on its website. At the same time, the 'B+' long-term and 'B' short-term sovereign credit ratings were affirmed. The transfer & convertibility (T&C) assessment is 'BB'. The outlook revision reflects S&P's view of the likelihood of a downgrade if the deterioration in the political environment, namely the failure to appoint a government since the last October's general elections, continues to affect the management of public-sector and external finances. In addition, external bank financing and foreign direct investment have contracted sharply, although stabilisation and some improvement is projected in our base case, S&P said. The ratings are constrained by Bosnia's complex political and institutional structure and weak central government institutions; external vulnerabilities, stemming from persistent current account deficits and funding challenges; and its structurally weak fiscal management framework. The ratings are supported by low debt and debt service burdens stemming from the prevalence of official funding and past debt forgiveness, and by the expectations for a sustained and significant international support.

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