S&P upgrades Mongolia

Standard & Poor's said it raised its foreign- and local-currency long-term sovereign credit ratings on Mongolia to BB- from B+ and the sovereign's transfer and convertibility risk rating to BB+ from BB.

The outlook is stable.

The agency said the upgrade reflects the country's fast-improving debt and external liquidity ratios, in conjunction with its solid growth prospects on the back of a burgeoning mining sector. These factors, coupled with generally prudent economic and fiscal management, are materially reducing the country's fiscal and external vulnerability, which S&P said have traditionally constrained its rating, especially given its narrow economic base and exposure to commodity price swings.

The ratings are also supported by strong donor country and multilateral support, which underpins government finances, eases the debt servicing burden and conditions Mongolian policy formulation, the agency said.

However, the ratings also take into account the fundamental vulnerability of growth prospects to shifts in world commodity prices and the country's relatively high financial sector vulnerabilities owing to still-high credit growth and weaknesses in banking supervision, S&P added.

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