Standard & Poor's (S&P) raised Portugal's long-term foreign currency sovereign credit rating to "A-" from "BBB+", citing improvement in its external financial balance sheet and corresponding reduction in external liquidity risks.
This is the first time in 13 years that Portugal is rated at ‘A’ level by all the financial rating agencies.
S&P affirmed Portugal's outlook at "positive", reflecting its view that the country's external and government debt positions could improve further.
Caretaker Finance Minister Fernando Medina told Reuters earlier last month that Portugal's public debt should drop further to 95% of gross domestic product this year if the next government remains focused on avoiding a budget deficit.
"We believe that, following the upcoming general elections in March, the next government will continue to exercise fiscal discipline," S&P said.
The ratings agency said the upgrade also reflects its view of a further decline in the government debt-to-GDP, opens new tab ratio.
Portugal's debt ratio fell to 98.7% of GDP last year from over 112% in 2022, ending below the 100% mark for the first time since 2009 as it approaches the euro zone's average of 90.4%.
Before the Troika’s intervention in Portugal in 2011, the four agencies all rated Portugal’s sovereign debt at ‘A’ level. They cut their ratings drastically after the request for a €79 billion bailout.
It then took seven years for the country to move out of “junk” ratings, and now, after 13 years, the trajectory of debt reduction is the main justification for agencies returning the country’s risk to ‘A’ level.
This is a crucial rating, as it allows Portugal to finance at lower costs.