Moody’s Investors Service has upgraded Argentina’s foreign-currency country ceilings to reflect improving credit conditions, including debt relief following May’s bond exchange that concluded a protracted and confrontational debt restructuring process.

The rating agency upgraded the foreign-currency ceiling for bonds and notes to B3 from Caa1 and the ceiling for foreign-currency bank deposits to Caa1 from Caa2. Moody’s has also upgraded foreign-currency-denominated Bodens, the government bonds that were issued following Argentina’s 2001 default, to B3 from Caa1, while the local currency rating of peso-denominated Bodens remains unchanged at B3. All ratings have a stable outlook. Argentina’s local-currency guideline remains at Ba1.

Although May’s debt exchange served to improve Argentina’s debt profile and to help alleviate the overall debt burden, Moody’s decision in favour of the upgrades was further encouraged by recent calculations indicating that post-restructuring debt ratios are now in line with those observed in countries placed at the low end of the B-rated category.

Another favourable credit development noted by the rating agency is the change that has been reported in the government’s debt currency composition as the share of peso-denominated debt stands currently at some 44% compared with less than 5% four years ago, a condition that should serve to reduce, on the margin, Argentina’s credit vulnerability to exchange rate fluctuations in the coming years.

Concerns about the country’s ability to maintain the conditions necessary to assure debt sustainability over time are part of the rationale for the current rating. Moody’s indicated that it is uncertain if the economic performance observed during the last two years can serve as a guide to future growth, and to export and fiscal prospects beyond the near-term. Considerations of this nature are likely to persist for the foreseeable future and will have a decisive influence over future rating decisions involving Argentina’s medium-term credit perspective.