MercoPress. South Atlantic News Agency

Moody's improves Uruguay's ratings

Sound institutions “reinforce political and social stability, attracting foreign investment,” Moody's argued

Uruguay's strong institutions have earned the South American country an upgrade in Moody's rating from Baa2 to Baa1, it was reported Friday. The risk-gauging agency also changed the outlook to stable.

 “Key drivers of the upgrade include strong institutions that support the implementation of structural reforms and continued compliance with fiscal and monetary policy frameworks, which in turn point to higher and sustained growth rates,” Moody's said in a statement. In addition, they “reinforce political and social stability, attracting foreign investment.”

“Management practices also support creditworthiness. These credit strengths are balanced by a moderate level of public debt, structural rigidities in public spending, and a relatively high, albeit declining, proportion of public debt in foreign currency,” it added.

Uruguay's government ended 2023 in compliance with its structural deficit target of 2.7% and an overall fiscal budget for the public sector, Moody's also noted while reckoning the country's dropping inflation had fallen within the Government's range.

Moody's appraisal came the same week that the International Monetary Fund (IMF) highlighted the Consumer Price Index's (CPI) downward trend. However, IMF Deputy Managing Director Antoinette Monsio Sayah warned against calling it a “victory too soon.” She made those remarks after meeting with Economy Minister Azucena Arbeleche in Montevideo on Wednesday for the customary annual review.

“I recognize the government's efforts in stabilizing debt, managing public finances, and promoting environmental policies,” Monsio Sayah said while highlighting the country's “innovation in finance,” investment climate, and “sustainable growth.”

The visiting expert also underscored Uruguay's economic policy regarding inflation and praised the “good actions” taken to bring the CPI within the target range nine months ago, which had an “impact” on growth.

“They have done things in a way that allows the progress of the economy to be felt and that is important,” she also noted. But she warned policymakers that there was still “a lot of work to do.”

“It is very important that they take it to heart, because, if not, the costs are very considerable and we know that there are distorting effects of inflation, as we have seen in the country in the past, which adversely affect the poorest and low-income countries,” she stressed.

According to Uruguay's National Statistics Institute (INE), inflation closed February at 4.71% and continues to be at its lowest levels in 18 years.

Sayeh was Liberia's Minister of Finance between 2006 and 2008 and worked in other public agencies in that country. She has also worked at the World Bank.