Fitch raises Russia

Fitch Ratings said it upgraded the Russian Federation's long-term foreign and local currency ratings to BBB from BBB-. The country ceiling has also been upgraded to BBB from BBB- and ratings for the MinFin V and VIII bonds have been upgraded two notches to BBB from BB+.

Fitch added the short-term foreign currency rating has been affirmed at F3. The outlook on all long-term ratings is stable.

"The rating action is underpinned by a massive improvement in the government's financial ratios," said Sharon Raj, a director in Fitch's sovereign group and the agency's lead analyst for Russia.

"We estimate that the general government surplus is likely rise to around 6% of GDP this year, supported by high oil prices as well as back tax payments. Against a background of real ruble appreciation, GDP growth of 5.5% and external debt prepayments to the IMF and the Paris Club of more than $17 billion, this should result in a decline in government debt to 17% of GDP by end-year, far below the BBB median of 36%, as well as the continued accumulation of assets in the stabilization fund."

Fitch noted that the sovereign rating continued to reflect the balance between Russia's strong financials and its structural weaknesses such as a high dependence on commodities and a weak banking sector.

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