Moody's outlook on Iran turns positive

29 September 2000

US credit ratings agency Moody's Investors Service has raised its outlook to positive from stable on the foreign currency country ceiling. The agency started rating Iran in 1999, giving it a B2 classification.

Moody's says its upgrade was based on the strengthening and stabilisation of the country's external accounts and debt service capacity as a result of higher oil prices.

A return to 'the episodes of external instability', as occurred in the 1990s, is unlikely even if oil prices fall, says Moody's. This is because of 'the decline in debt payments going forward and accumulation of external reserves'.

The agency notes that Iran's access to foreign capital has improved, 'while its sources of capital have diversified'.

Gradual economic liberalisation and better relations with Europe 'have led to a surge in private sector investment inflows', it says; the investment has been mainly directed to the oil sector, but has also included 'respectable flows' to the non-oil sector.

The B2 rating of 1999 put Iran on the same level as Nicaragua, Turkmenistan and Honduras, among others. Other main rating agencies, such as the US' Standard & Poor's (S&P), operate only on a solicited basis; S&P said on 20 September it still does not offer coverage on Iran.

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