Ratings Upgrade: A Glimmer Of Light Amidst Gathering Storm Clouds

In its first rating's action on Nicaragua since 2006, on May 26 Moody's raised the Central American state's foreign currency government bond rating to B3 from Caa1 and affirmed its domestic currency bond rating at B3. Moody's also raised the country ceiling for Nicaraguan foreign currency bonds to B2 from B3. While still well below investment-grade status, the upgrade is nevertheless a step in the right direction, and highlights improvements to the sovereign's debt metrics as a result of debt forgiveness, in addition to generally low fiscal deficits. At the same time, however, Moody's highlighted the country's weak long-term growth prospects and ongoing concerns surrounding the strength of domestic institutions as balancing out Nicaragua's risk profile at this juncture.

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