(E) EUR500 mill. seven-year bond issued by the Republic of Croatia
Distributed by CroatianWorld
Can someone explain this bond to laics?
Fitch rates Croatia's Euro 500m bond Fri February 14, 2003 10:02 AM ET (The following statement was released by the rating agency) NEW YORK, Feb 14 - Fitch Ratings, the international rating agency, has assigned a 'BBB-' (BBB minus) Long-term foreign currency rating to today's EUR500 million seven-year bond issued by the Republic of Croatia.
The Outlook on the rating is Stable.
Croatia's creditworthiness has improved markedly since the change of government in the 2000 elections. An eracharacterized by authoritarianism, nationalism and isolation has ended, and Croatia's foreign policy is now focused on international integration.
This change in strategy has delivered substantial gains including membership of the NATO Partnership for Peace programme, numerous free trade agreements and a Stability and Association Agreement with the EU.
The country is to submit its formal application for EU membership in late February.
These integrationist measures have been accompanied by an acceleration of structural reforms, while an ambitious fiscal adjustment programme is underway to reverse the marked fiscal deterioration of the late 1990s.
Against this background, the current account deficit has fallen sharply, the financing mix has improved and gross external debt ratios havestabilized.
Preliminary indications point to a current account deficit of some 3.5% of GDP in 2002, largely covered with foreign direct investment.
While external borrowing rose in 2002, foreign exchange reserves are estimated to have ended the year at USD5.8 billion, an increase of nearly 40% on the year.
The EUR500m bond issue completes Croatia's scheduled bond issuance for 2003 and should ensure that external financing needs are easily met this year.
Fitch expects another sizeable balance of payments surplus in 2003. In addition, Croatia has recently signed a 16-month USD146m precautionary stand-by arrangement with the IMF.
This would offer support to the balance of payments in the event of adverse exogenous shocks.
Despite this progress, some weaknesses remain, and further credit rating upgrades will hinge on the government's ability to adhere to its reform plans.
In particular, although the fiscal adjustment has been significant, Croatia continues to have one of the heaviest tax burdens in the region, and capital spending needs remain high. Steps to bring taxes more into line with the regional average will necessitate additional cuts to current spending if the fiscal deficit is to remain on a sustainable path, while more progress will need to be made on the reduction of state-issued debt guarantees.
In other areas of structural reform, too, further progress is necessary if Croatia is to reap the full benefits of its recently secured trade agreements and continue to attract the foreign investment necessary to upgrade its industrial base and tourism potential and to sustain solid economic growth.