Ratings agency S&P Global announced Monday it was upgrading the debt rating for Greece given the improved prospects for the country to pay off its sovereign debt.
S&P raised the country’s debt grade a notch to ‘B+’ with a stable outlook, noting that the debt relief announced by Europe last week and the country’s cash buffers ‘significantly’ reduced debt servicing risks over the next two years.
The upgrade comes after eurozone ministers agreed to extend maturities by 10 years on major parts of the country’s total debt obligations, a mountain that has reached close to double the annual economic output.
They also agreed to disburse 15 billion euros ($17.5 billion), which left Greece with a hefty 24 billion euro safety cushion, officials said.
S&P said the maturity extensions and the sizeable cash buffer would cover Greece’s debt payments through 2021 and ‘partly cover repayments coming due in 2022,’ significantly reducing refinancing risks.
However, the ratings agency cautioned that ‘public and private debt remains high and the authorities’ track record on attracting foreign direct investment is weak.’
Greece has the second-highest gross general government debt-to-GDP ratio after Japan, S&P said.
The country’s eight-year crisis toppled four governments and shrank the economy by 25 percent. Unemployment soared and still hovers over 20 percent, sending thousands of young educated Greeks abroad.
S&P said it was important for the country to resist rollback of economic reforms and continue with additional measures ‘to restore economic health and confidence in the banking sector as well as to attract foreign capital inflows to finance growth.’