Standard & Poor's - S&P confirms Malta’s credit rating

Tuesday, February 28th, 2006

Standard and Poor’s rating services affirmed their A Long-term and A-1 short-term sovereign credit ratings on Malta, concluding their outlook as stable.

The report affirmed Malta’s A senior unsecured debt rating on the outstanding $250 million bond maturing 2028 and $205 million bond maturing 2009, originally issued by the Freeport Terminal (Malta) plc and subsequently transferred to the Freeport Corporation. Consequently, the government guarantees timely debt service on these bonds.

Eileen Zhang, a Standard and Poor’s credit analyst states, “The ratings on Malta are supported by strong political institutions that underpin appropriate macroeconomic policies, including a commitment to continue to curb the currently substantial fiscal imbalances.”

“Malta’s narrowly based and open economy is vulnerable to external shocks, although equity inflows offset substantial portion of the persistent current account deficit.”

Despite sluggish GDP growth, the government deficit as a percentage of GDP had fallen since 2004 and was expected to continue falling to 2.9 per cent of GDP this year, from an average of 6.2% in the past 5 years.

Government debt (including state guaranteed debt of Malta Freeport Corp Ltd) was expected to begin to decline this year with help of further privatisation proceeds. This year, government debt as a percentage of GDP is projected at 76% of GDP, after peaking at 81% in 2004.

S&P states, “The current target of reducing the fiscal deficit to 1.2% of GDP by 2008 remains challenging, although Standard & Poor’s expects the gradual reduction in the general government deficit may allow EMU membership in either 2008 or 2009”

According to Ms Zhang, “We expect that the government’s commitment to reversing budget imbalances will continue, leading to further fiscal reforms and the reduction of general government debt

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