Moody's ups Ecuador outlook to positive

Moody's Investors Service said it changed the outlook on Ecuador's Caa1 foreign-currency government bond rating to positive from stable in light of the country's improved liquidity position and declining debt ratios.

As a result, the outlook on the Caa1 foreign-currency country ceiling for bonds and on the Caa2 foreign-currency country ceiling for bank deposits was changed to positive.

Moody's said some of the factors behind Ecuador's improved liquidity position and declining debt ratios include greater access to multilateral and market financing, a build-up in public sector and overall banking system deposits and continued growth in remittances from abroad. In addition, despite periods of intense political turmoil and policy uncertainty, the government has maintained fiscal surpluses at the non-financial-public sector level.

Ecuador's ratings continue to be constrained by important structural weaknesses, the agency said. These include increasingly limited fiscal flexibility in the event of a downturn in oil prices, limited policy adjustment tools due to dollarization, an unstable institutional framework aggravated by a high degree of political volatility, and uncertainty over the development of the oil industry.

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