Moody's kept the rating of long-term issues and senior unsecured bonds at B1, arguing that there is a "solid fiscal framework that has stabilized debt at lower levels compared to its rated peers.
Honduras' fiscal balance behaves favorably with respect to GDP and has been enough to stabilize overall government debt at around 41% of GDP, Moody's report explains.
The entity and the Honduran government agreed to "a combined credit facility of Special Drawing Rights and 24-month Extended Credit Service, for $311 million."
For the country's business sector, the agreement between the International Monetary Fund and Honduras "represents a commitment by the government to maintain macroeconomic stability, a fundamental pillar that favors the country's competitiveness and creates the minimum conditions for the promotion of investment. See "Cohep Expects IMF Agreement to Maintain Macroeconomic Stability".
The latest risk ratings for the issuance of long-term debt of Central American economies identify Panama as the most attractive country to invest in.
On March 8, Moody's decided to raise its long-term issuer rating in foreign currency from Baa2 to Baa1, arguing that the outlook remains more favorable in the medium term.
"The tightening of global financing conditions is a concern for Central American countries with large current account deficits or those highly dependent on capital flows."
According to the report "World Economic Outlook - January 2019" compiled by the World Bank (WB), countries with a high external debt burden would be at risk if a sudden change in investor confidence in emerging market and developing economies were to occur.
The rating agency attributed the improvement in the sovereign debt rating from B2 to B1 to continued fiscal discipline and the fact that the country has managed to stabilize its debt at lower levels than its peers.
From a statement issued by Moody´s:
New York, September 22, 2017 -- Moody's Investors Service ("Moody's") has today upgraded the Government of Honduras' foreign currency and local currency issuer and senior unsecured ratings to B1 from B2. The rating outlook was moved to stable from positive.
Improving the sovereign debt rating from B3 to B2 reflects the significant reduction achieved in the fiscal deficit, which fell from 7.9% of GDP in 2013 to 3.1% in 2015.
The main factor which influenced the rating upgrade was consolidation of the fiscal discipline process enacted over the past two years and controls imposed on public institutions to achieve cost containment and improve tax administration.
Noting the political system's inability to agree on fiscal issues, Standard & Poor's has downgraded, from BB to BB-, the rating for the country's long-term debt, giving it a negative outlook.
Costa Rica Long-Term Ratings Lowered To 'BB-' On Continued Fiscal Deterioration; Outlook Is Negative
25 Feb 2016
Source: Standardandpoors.com
OVERVIEW
The combination of growing spending pressures and lack of tax reform has weakened Costa Rica's public finances and raised its vulnerability to
Fitch notes that the relatively favorable external environment will not be enough for Central American countries to improve their credit ratings, which could remain stable despite fiscal problems.
From the press release by Fitch Ratings:
Fitch Ratings-New York-22 October 2015: External tailwinds are unlikely to lead to a significant uplift in Central America's creditworthiness, says Fitch Ratings in a new special report.
Basing its decision on the progress being made in the economy in fiscal matters, Moody's has raised the outlook rating from positive to stable.
From the press release by Moodys:
New York, May 11, 2015 -- Moody's Investors Service has today revised the outlook on Honduras' government bond ratings to positive from stable. Concurrently, Moody's has affirmed the foreign and local currency government's issuer ratings and senior unsecured ratings at B3..
According to Moody's, credit profiles remain constrained by the rigidity in spending, low levels of government revenue and the deterioration of the cost of financing with debt.
From a press release issued by Moody's:
Honduras's credit profile is limited by rigidity in spending, low levels of government revenue and a deterioration of the cost of debt financing, according to Moody's Investors Service in its recent report on the country's credit analysis.
Analysis of debt sustainability in Central America, economic growth, inflation, revaluation and management of the fiscal deficit.
Central America Fiscal Lens No. 5 reported that gross domestic production in Central America in 2012 amounted to U.S. $184.000 million. The fastest growing economies were Panama, Costa Rica and Nicaragua.
As for exports, although they grew by 7.1%, they were quite far from the 20.5% achieved in 2011.
Standard & Poor's has downgraded the sovereign rating of Honduras to "B" from "B +" with a stable outlook because of its diminished fiscal flexibility and increased debt burden.
A statement from S & P:
Summary
Honduras' reduced fiscal flexibility and growing debt burden have made it vulnerable to external shocks or political problems.
We believe it is likely that the high level of central government deficit, of 6% of GDP in 2012 and this year, will increase the net government debt to 27% of GDP by the end of 2013 compared with 21% in 2012.
Governments should act as good parents, thinking about the welfare of future generations, not just about the next election.
Governments should act as good parents, thinking about the welfare of future generations, not just about the next election.
In his article in Martes Financiero, Oscar Castaño Llorente discusses the rationale of the proposed creation of the Panama Savings Fund (FAP in Spanish), not only in its philosophical scope, but also from a practical point of view, present and future.
Fitch Ratings has analyzed patterns of economic growth in Central America, and its relationship to sovereign debt ratings.
According to Fitch Ratings, two patterns have emerged in the evolution of economic growth and public finances in Central America. The quality of sovereign credit in Central America is largely reflected by these two patterns, and this is expected to remain the case for the foreseeable future.
At current exchange rates, external debt could increase by $800 million.
The current exchange rate will mean that more money will have to be paid for imported products, which will increase inflation and living costs, and increase debt by $800 million , says economist Martin Barahona.
"Devaluation means, for example, that we import inflation. As the exchange rate continues to rise, the domestic price of fuel or imported products in Honduras, regardless of international prices, which are already on the rise, will rise simply due to devaluation", said Barahona, according to LaPrensa.hn.