The U.S. rating agency Moody's Investors Service announced that prospects for Slovakia's rating are getting worse. The cited reasons were the deepening deficits of both the state budget and the current account, the high interest rates necessary for keeping the crown's exchange rate stable, and increasing short-term debt, all of which are factors that reduce Slovakia's ability to tackle possible external shocks., Moody's is uneasy, furthermore, about political events related to the coming general elections and legislative changes reducing the powers of the National Bank of Slovakia.
The future changes in the Slovak Republic's evaluation could concern the current Baa3 rating for bonds in foreign currencies and Ba1 for bank deposits. "NBS does not rebut Moody's opinion on interest rates in Slovakia," said Ján Onda, the NBS spokesman. "However, the main reason for the current high interest rates is high demand by the public sector for finances and not the effort to keep the crown's exchange rate stable. Slovakia's debt is growing, but in 1997, unlike in 1996, the inflow of long- and mid-term foreign capital prevails."
