Belgium ECA Upgrades Iran’s MLT Classification

Belgium’s export credit agency – the Credendo Group – announced that it has upgraded Iran´s medium-long term political risk classification to category 5.

“Iran is also fairly politically stable in a volatile region despite rising political faction rivalry since the nuclear deal was signed last year. In addition, the country is adhering to the nuclear deal, reducing the risk of a snapback,” Credendo Group said in a press release on its website.  

“Nevertheless, the nuclear deal is unlikely to collapse. In addition, Iran has been significantly reducing the substantial payment arrears it incurred during the intensification of the sanctions in 2012.”

The Belgian ECA highlights that from an economic perspective Iran is doing very well. The relatively well-diversified economy has strong growth potential thanks to prudent macroeconomic policies and the gains of the nuclear sanctions relief in January 2016.

Inflation has fallen to single digits and public finances are sound. The current account balance has deteriorated and is expected to register a small deficit in 2016 but is likely to show a surplus again in the coming years.

Plus Points

In addition, the country has low external debt and a high level of foreign exchange reserves. The major challenges for the economy remain the rather difficult Iranian business environment, continuing non-nuclear sanctions and re-engagement with the West, notably with international banks, due to the residual sanctions.

The forthcoming US presidential elections, the perceived inability to extract satisfactory economic gains from the nuclear deal and rising political faction tensions put pressure on the nuclear deal.

Taking into account the strong macro-economic fundamentals, political stability, adherence to the nuclear deal and significant reduction in payment arrears, Credendo Group has decided to upgrade Iran´s MLT political risk classification to category 5.

Credendo Group is the first member of the Organization for Economic Cooperation and Development (OECD), to classify Iran in category five.

“EOCD is now more likely to upgrade Iran’s risk classification to category 5, since OECD member countries usually act in unison with each other,” Arash Shahraini, deputy CEO of Export Guarantee Fund of Iran, told Financial Tribune.

The Organization for Economic Cooperation and Development (OECD) upgraded Iran's rating in the country risk classifications of the Participants to the Arrangement on Officially Supported Export Credits (CRE) from 7 to 6.

The move is of high importance for Iran at the moment “Because it would reduce the cost of finances for investments in Iranian projects,” he added.