Swiss Ambassador to Armenia Lukas Gasser: Switzerland will try to contribute to a peaceful settlement of the Nagorno-Karabakh conflict without questioning the established formats such as the OSCE Minsk process
by Tigran Khachatryan
Moody's Investors Service has changed Armenia's foreign-currency bond ceiling to Ba1 from Baa3. The website of Moody's says that the lower ceiling means that the highest rating that can be assigned to a domestic issuer in foreign currency in Armenia is now Ba1. Concurrently, Moody's changed Armenia's short-term foreign-currency bond ceiling to Not-Prime (NP) from Prime-3 (P-3). This action follows the local-currency ceilings adjustments to Baa3 from Baa1 announced on August 20, 2013.
Armenia's ceilings thus are as follows: the local-currency bond and bank deposit ceilings are Baa3, the foreign-currency bond ceiling Ba1, and the foreign-currency bank deposit ceiling Ba3. The short-term foreign-currency ceilings are Non-Prime (NP).
Moody's decision to lower Armenia's foreign-currency bond ceiling is based on the rating agency's assessment of Armenia's low institutional strength in addition to limited financial and trade openness. In light of the significant dollarization of the economy, Moody's deems a one notch gap between the foreign- currency bond ceiling and Armenia's government bond rating appropriate.
If Armenia's government bond rating were to change, Moody's would likely reassess the country's ceilings at that time.
Moody's foreign currency bond ceiling is an assessment of the probability that a defaulting government would adopt a moratorium on the foreign currency debt repayments of domestic issuers. Moratorium restrictions refer to two separate risks: restrictions on moving foreign exchange offshore (transfer risk) and restrictions on freely converting local currency to foreign currency (convertibility risk). In practice, transfer and convertibility restrictions often occur together. Moody's assesses moratorium risk within the historical context of the ongoing process of financial market deepening and globalization, and with respect to the individual country's institutional environment, financial and economic integration and openness, capital account openness, as well as domestic economic management which could alter a government's assessment of the desirability of debt moratorium as a policy option.