The two US ratings agencies, Moody's Investors Service and Standard & Poor's Ratings Group (S&P), have assigned investment grade ratings to the government's long-term foreign currency debt. This is in preparation for the country's first-ever Eurobond issue, which would convert an estimated $200 million of short-term debt into long-term debt.

Moody's assigned a Ba3 sovereign rating. 'Bonds that are rated Ba are judged to have speculative elements; their future cannot be considered as well assured,' according to Moody's definitions. The 3 indicates that the issue ranks at the lower end of the category. S&P gave the issue a B+ rating. 'Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments,' according to S&P definitions.

The ratings are based on strengthened economic performance, an increased commitment to foreign investment, and a record of uninterrupted external debt service. However, the government's creditworthiness is constrained by fiscal deficits, heavy debt burdens and continued political turmoil.

No firm details have been released on the proposed Eurobond issue. 'We are still considering it,' says minister of state for finance, Makhdoom Shahabuddin. The UK's Clifford Chance is advising the government on the issue (MEED 24:6:94).