14.08.2012 22:38
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Suriname -- Moody's Upgrades Suriname's Bond Rating to Ba3, Assigns Positive Outlook

New York, August 14, 2012 -- Moody's Investors Service has upgraded the foreign currency rating of the government of Suriname to Ba3 and changed the outlook from stable to positive.

Key ratings drivers for this decision include:

1. Our expectation of continued prudent fiscal management and improved debt sustainability metrics

2. Positive short- to medium-term growth prospects

3. Greater anticipated resilience to external economic shocks

4. Access to concessional financing from multilateral and bilateral creditors

RATINGS RATIONALE

The government of Suriname has demonstrated prudence in fiscal management, as characterized by low budget deficits relative to its rating peers and steadily declining debt ratios. The government has made progress towards exercising expenditure restraint, more effective revenue mobilization, and fiscal sector reforms, including public financial management legislation and introduction of a VAT in 2013. Suriname is also no longer dependent on volatile grant funding and has cleared outstanding arrears with bilateral creditors.

Suriname's Ba3 rating incorporates Moody's assessment of the country's robust growth, driven by gold mining, petroleum, and construction sectors. Medium-term growth prospects are further supported by Suriname's ability to attract significant foreign investment in the extractive industries and offshore oil exploration.

The sovereign's vulnerability to external financial shocks has been reduced by the build-up of foreign exchange reserves in excess of 20% of GDP, resulting from robust current account surpluses and healthy capital inflows in recent years. The establishment of a sovereign wealth and stabilization fund, planned for 2013, should further strengthen these buffers.

The rating action also reflects a change in the debt profile, with the government increasingly relying on multilateral and bilateral sources of concessional foreign currency debt to finance capital projects and moving away from direct local currency funding from the central bank. This should strengthen central bank independence and anchor inflation expectations.

Moody's noted that the government's balance sheet remains vulnerable to volatility in commodity prices. Mitigating this vulnerability is a key medium-term credit challenge.

Weak institutions remain a key rating constraint, and continued public sector capacity development, as well as improvements to the investment climate, will be critical to maintaining the rating.

WHAT COULD CHANGE THE RATING UP/DOWN

Positive ratings momentum will be supported by (1) an accelerated divestment of government-owned enterprises, including Staatsolie, the state-owned petroleum company; (2) a reduction in the government's reliance on central bank financing; (3) a deepening of the local currency bond market for government securities.

Although unlikely given the positive rating outlook, factors that could lead to a negative rating action include (1) a deterioration in the government's fiscal balance triggered by growth in non-capital spending, which will raise inflation expectations and put pressure the currency peg; (2) a substantial increase in external commercial debt to fund the acquisition of large paid-in equity stakes in the Rosebel and Newmont gold mining concessions, currently under discussion, which will have limited returns in the form of additional fiscal revenues and result in greater sovereign exposure to the gold sector; (3) a rapid build-up of debt without adequate institutional safeguards to strengthen financing capacity.

METHODOLOGY

The rating action unified Suriname's foreign and local currency bond ratings in accordance with Moody's Rating Implementation Guidance (February 2010). The guidance, based on an analysis of sovereign defaults over the last two decades, allows a rating split between local and foreign currency bond ratings in instances when an economy is characterized by (1) capital account controls, and (2) external liquidity constraints or a material and observable difference in a government's ability and willingness to repay local relative to foreign currency creditors.

While Suriname has de jure capital controls, there is no evidence that, in the event of distress, the government would apply these controls to limit payments on its foreign currency obligations (owed predominantly to preferred multilateral creditors).

Suriname's country ceilings on bonds and deposits were also modified as part of this rating action. The foreign currency bond ceiling was adjusted to Ba1 and the foreign currency deposit ceiling to B1. Suriname's local currency bond and deposit ceilings were adjusted to Ba1.

The methodologies used in this rating were the Sovereign Bond Ratings Methodology published in September 2008, and the Rating Implementation Guidance (Narrowing the gap -- a clarification of Moody's approach to local versus foreign currency government bond ratings) published in February 2010. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the rating are the following : parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Edward Al-HussainyAsst Vice President - Analyst Sovereign Risk Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Bart Oosterveld MD - Sovereign Risk Sovereign Risk Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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MIS, a wholly-owned credit rating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS's ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading "Shareholder Relations -- Corporate Governance -- Director and Shareholder Affiliation Policy."

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