Moody's assigns 'Ba1' rating to Azerbaijan

The former Soviet state bordering the Caspian Sea and Iran has "excellent medium-to-long term prospects for surpluses on the current account and consolidated budget balances" based on a rapid expansion of oil production and exports, Moody's said.

The windfall from oil profits is expected to swell government coffers, expand official and "oil fund" foreign currency reserves significantly and shrink the country's already low debt ratios.

The key challenges for the country, however, will center on its ability to manage these gains prudently and to encourage diversification in non-oil sectors of the economy, Moody's said.

It also assigned a foreign currency country ceiling for Azerbaijan's bonds and notes at "Baa2/P-2," reflecting a medium risk of a moratorium in the event of a government default.

Moody's assigned a foreign currency bank deposit ceiling of "Ba2/NP" and a local currency deposit ceiling of "Baa1/P-2." The local currency guideline, the highest possible rating that can be assigned to any issuer domiciled in Azerbaijan, is assigned at "A3." Reuters