The outlooks on both ratings are stable.
"Enduringly high commodity prices are strengthening Russia's macroeconomic and financial position at a remarkable pace, further reducing the likelihood of any future risk to sovereign debt service," said the agency's chief sovereign debt analyst for emerging European markets, Edward Parker.
Fitch also upgraded the country's short-term rating to F2 from F3 and the Country Ceiling to BBB+ from BBB.
Senior Russian officials had said in June they expected the country's ratings to improve following early repayment of its outstanding Soviet-era debt to the Paris Club of creditor nations.
Russia and the Paris Club on June 30 signed a multilateral protocol on pre-term payment of Russia's outstanding debt.
The agency said, "Fitch expects the general government to run a budget surplus of around 6.5% of GDP this year, allowing it to pre-pay $22 bln of debt to the Paris Club [and] reduce its debt-to-GDP ratio to just 11% of GDP by the end-2006 (compared with the 'BBB' median of 34%)."
The government will also be able to increase the Stabilization Fund to around $89 bln from by the end of the year, up from $43 bln at the end of 2005, Fitch said.
The Stabilization Fund, established to accrue windfall oil revenues from high oil prices, stood at $76.9 billion as of July 1, according to the Finance Ministry.
Fitch said it expected Russia to run another current account surplus of over 10% of GDP for 2006, and to boost foreign exchange reserves to $271 bln by the end of the year, up from $182 bln at the end of 2005.
Russia is expected to become a net external creditor to the tune of over $200 billion this year, the agency said. "The economy and living standards are booming. Fitch forecasts real GDP to grow by 6.7% in 2006 and Russia could become the 10th largest economy in the world, up from 22nd place in 1999."
However, negative factors, according to Fitch, restraining Russia's credit status, include its dependence on natural resource exports, which "exposes the economy to commodity price shocks and poses challenges to macroeconomic management, governance, competitiveness and diversification."
The business climate is also weakened by "bureaucracy, corruption and uncertainty over the rule of law," while slow structural reforms, increasing state control over the economy and relatively low investment-to-GDP ratio put long-term growth prospects in doubt, Fitch said.
