At the same time, Standard & Poor's affirmed its 'A-2' short-term foreign and local currency ratings and its 'ruAAA' Russia national scale rating on the sovereign. The outlook is stable, the agency said. In addition, S&P raised the transfer and convertibility assessment on Russia to 'A-' from 'BBB+'.
"The upgrade is based on ongoing improvements in Russia's foreign exchange reserves coverage and the strengthening general government balance sheet," said S&P credit analyst Moritz Kraemer. "Russia's economy is still benefiting from the global oil price boom, while policymakers continue to handle concomitant challenges to macroeconomic stability in a circumspect manner."
Russia has the world's fourth largest reserves of foreign currency after China, Japan and Taiwan mainly because of high oil prices. Urals crude, the country's main blend of oil, is trading at about $65 per barrel with Brent crude dipping under the $70 mark.
The agency said foreign exchange reserves held by the Central Bank, including the government's Stabilization Fund, which was set up to accrue windfall profits from high world oil prices, could be expected to reach $285 billion by the end of 2006 (a fourfold increase from 2003) and would cover almost nine months of current account payments and surpass short-term debt by more than 350%.
The Central Bank said Russia's gold and foreign currency reserves stood at $258.5 billion as of August 25.
S&P said astute fiscal management had improved the government's balance sheet. General government debt will fall below 10% of GDP next year to less than one-third of 'BBB'-median ratio, the agency said, and the government is currently poised to become a net creditor by the end of 2006.
