Fitch hikes Portugal’s sovereign debt rating to ‘A’

 In News, Ratings agencies, Sovereign debt

The US ratings agency has raised the rating of Portugal’s sovereign debt from BBB+ to A- with a stable outlook.

It means that Portugal has at last achieved coveted ‘A’ status after years in which its debt was considered non-investment grade or ‘junk status’ as pundits in the international lending markets call it.
Having an ‘A’ status awarded by any of the four major international ratios agencies is important as it lowers the interest paid by a State to investors in the bond market on the international borrowing required o finance the day-to-day running of its public administration and civil service.
If a ratings agencies think that a government’s public spending is out of control and its outgoings are much more than its revenues, it can downgrade the status of its rating, which puts up the interest paid to investors on the bonds.
This new classification on the Portuguese republic’s debt means that Fitch thinks that it has a strong capacity to pay off its debts.
Fitch also thinks that the ratio of Portugal’s public debt to its GDP shows a strong downward trend that contributed to the upgrade.
“We project that this ratio will fall to 104% this year compared to 112.4% at the end of 2022, and that by 2025 it will be 96.5%”, states Fitch in its report.

Photo: EPA/LUSA – Justin Lane