Fitch affirms Moldova

Fitch Ratings said it affirmed the Republic of Moldova's B- foreign-currency and B local-currency issuer default ratings, B short-term foreign currency rating and B- country ceiling. The outlook is stable.

Moldova remains the poorest country in Europe, being a heavily agricultural economy with a weak industrial base and low investment. However, Fitch said the country has a reasonably well educated and sufficiently flexible workforce; it has reacted to poverty and limited opportunities at home by large-scale emigration. Workers' remittances have helped offset the impact of a declining trade balance on the current account of the balance of payments and have contributed to a rise in foreign exchange reserves.

Public and external debt ratios have fallen over the past five years, although Fitch said this is an ambiguous "improvement" as much of the fall reflects Moldova's near inability to access international borrowing and heavily discounted debt restructuring deals.

Fitch said Moldova remains in arrears on repayments of principal on most of its bilateral external debt, although it continues to pay interest on these loans. Private sector debt, which also contains substantial arrears, has risen sharply and, according to the IMF, has exceeded that of the public sector since 2003.

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