Fitch Ratings has upgraded Iceland's Long-term foreign currency Issuer Default Rating (IDR) to ‘BBB+' from ‘BBB‘ with a stable outlook. Long-term local currency IDR was also upgraded to ‘A-' from ‘BBB+' . The agency has also upgraded the Short-term foreign currency IDR to ‘F2' from ‘F3'and upgraded the Country Ceiling to ‘BBB+' from ‘BBB‘.
According to Fitch, the main drivers for the upgrade are the government´s strategy for the removal of capital controls, published in June, to counter the negative implications on the balance of payments. The removal strategy is credible according to Fitch, and the plan addresses the sources of potential balance-of-payments pressure. The rating agency also states that lifting of the capital controls will have positive effect on the business environment in Iceland. Moreover, the implementation of the strategy will bring substantial windfall for the Treasury and improve the external position of the economy. Lower debt levels and improved fiscal position also contribute to key drivers for the upgrade.
Fitch ratings upgrade is the third Iceland gets this month, both Moody´s and Standard & Poor's had upgraded Iceland before by one notch.