Latest news with #fiscal consolidation
Times of Oman
3 days ago
- Business
- Times of Oman
"Sovereign rating upgrade was much required," says PM EAC member Sanjeev Sanyal as S&P upgrades India to BBB
New Delhi: In a major move, ratings agency S&P Global on Thursday raised its sovereign credit ratings on India to 'BBB' from 'BBB-'. According to the ratings agency, India is prioritising fiscal consolidation, demonstrating the government's political commitment to deliver sustainable public finances, while maintaining its strong infrastructure drive. The agency further said that India's robust economic expansion is having a constructive effect on its credit metrics, and they expect sound economic fundamentals to underpin growth momentum over the next two to three years. The raise in sovereign credit ratings has been welcomed by Sanjeev Sanyal, Member of Prime Minister Narendra Modi's Economic Advisory Council. "I am pleased to hear that S&P has upgraded India's sovereign rating to BBB from BBB-. This was much required because, as I have said before, the difference between what the ratings were being given by the three big rating agencies and my own model suggested was a gap of two notches," Sanyal said. Sanyal argues that given India's economic performance other rating agencies would also raise the outlook for India."By doing this, at least the gap has been reduced somewhat, but I would argue that given India's economic performance, we should expect a similar upgrade by the other two agencies, as well as over the next two to three years, a further upgrade, because as I said, even after this upgrade, India is probably underrated by one notch," Sanyal said. Alongside the rating upgrade, S&P also revised its transfer and convertibility assessment for India to 'A-' from 'BBB+', citing an improved monetary and external environment. India's economic momentum was central to the upgrade decision. Real GDP growth averaged 8.8 per cent between fiscal years 2022 and 2024 -- the highest in the Asia-Pacific region -- and S&P expects this strength to continue, projecting average growth of 6.8 per cent annually over the next three years. This strong growth, despite ongoing fiscal deficits, is helping to moderate the debt-to-GDP ratio. The agency said India's reliance on domestic consumption, which drives around 60 per cent of GDP growth, offers resilience against external shocks, including recent U.S. tariffs and changes in energy import sources. India's fiscal position, historically a weak point in its ratings profile, is showing signs of improvement. S&P noted a gradual consolidation path, projecting the general government deficit to shrink from 7.3 per cent of GDP in fiscal 2026 to 6.6 per cent by fiscal 2029. A key driver behind this fiscal improvement is a shift in government spending priorities. Over the past five to six years, budget allocations have increasingly favoured capital expenditure. The Union Government's capex is set to reach INR 11.2 trillion -- about 3.1 per cent of GDP in fiscal 2026, up from 2 per cent a decade ago. Including spending by state governments, total public infrastructure investment now stands at about 5.5 per cent of GDP, putting India on par with or ahead of global peers. S&P emphasised that India's rating is underpinned by a vibrant economy, a strong external balance sheet, and democratic institutions that contribute to policy stability and predictability.
The National
4 days ago
- Business
- The National
S&P raises India's credit rating to BBB in first upgrade for 18 years
S&P Global Ratings upgraded India 's long-term sovereign crediting rating to "BBB" from "BBB-" on Thursday, owing to the country's fiscal consolidation, credible monetary policy and strong economic growth. It was India's first upgrade in 18 years. 'The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations,' S&P Global analysts wrote. "Together with the government's commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics." S&P also raised India's short-term ratings to "A-2" from "A-3", adding that the outlook on the long-term rating is stable. It also revised its transfer and convertibility assessment to "A-" from "BBB+". India's Ministry of Finance said it welcomed S&P's decision to upgrade the country's credit rating. The ratings agency said India's economy had a 'remarkable comeback' from the Covid-19 pandemic, with real GDP growth averaging 8.8 per cent over the 2022 fiscal year to the 2024 fiscal year, the highest in the Asia-Pacific. Analysts said they expect GDP to increase 6.8 per cent annually over the next three years. 'India remains among the best performing economies in the world,' S&P Global said. S&P Global also expects the effects of the US tariffs on India's economy 'will be manageable', noting that about 60 per cent of its growth comes from domestic consumption. US President Donald Trump last week doubled India's tariff rate to 50 per cent because of its continued imports of Russian energy. 'We expect that in the event India has to switch from importing Russian crude oil, the fiscal cost, if fully borne by the government, will be modest given the narrow price differential between Russian crude and current international benchmarks,' analysts wrote. Analysts also anticipated that, factoring in sectoral exemptions on pharmaceuticals and consumer electronics, the exposure of Indian exports that would be subjected to tariffs at 1.2 per cent of GDP. While this could lead to a one-off hit to growth, S&P does not anticipate it will hurt India's long-term growth prospects. S&P also projected a general government deficit of 7.3 per cent of GDP in the 2026 fiscal year to fall to 6.6 per cent by to the 2029 fiscal year. It also anticipates the country's debt-to-GDP ratio to fall to 78 per cent by the 2029 fiscal year. S&P said it may lower the ratings if it finds weak political commitment to consolidated public finances. It may raise the ratings if fiscal deficits narrow in a way that would lower the general government debt below 6 per cent of GDP on a structural basis.
Bloomberg
11-08-2025
- Business
- Bloomberg
Kenya's Fiscal Consolidation Can't Be Pushed Further, Mbadi Says
Kenya plans to switch to privatization to stimulate the economy after exhausting fiscal consolidation, its Treasury secretary said, ahead of talks with the International Monetary Fund for a new program. 'Having pursued fiscal consolidation over the last three years, the policy has now reached optimal levels and hence can't be pushed further,' John Mbadi told lawmakers on Monday. 'In this case an economic stimulus mechanism must be pursued,' he said as he sought lawmakers' approval to list part of its stake in state-owned Kenya Pipeline Co. via an initial public offering on the Nairobi bourse.
Zawya
17-07-2025
- Business
- Zawya
Benin Can Mobilize More Domestic Resources to Drive Inclusive Growth and Equity
More inclusive growth path, taxation and spending adapted to vulnerable populations could further accelerate efforts to reduce poverty and inequality, notes the latest edition of the Benin Economic Outlook report. The first part of the report, Raising Domestic Revenue Mobilization while Protecting the Poor, analyzes recent economic developments and presents the country's medium-term prospects. In 2024, Benin's economic growth reached 7.5%, its highest level since 1990, thanks to the strong performance of the services and industrial sectors. Poverty fell by 2.2 percentage points, from 33.2% in 2023 to 31% in 2024. Continued fiscal consolidation helped achieve the West African Economic Monetary Union –WAEMU-- fiscal deficit target of 3% in 2024 and reduce the debt, thereby helping to improve the country's debt profile. Benin is on the verge of integrating into global value chains with the development of the Glo-Djigbé industrial zone (GDIZ). Despite heightened global trade uncertainties and volatile trade relations with neighboring countries, economic growth is projected to average 7.1% over 2025-2027. The dynamism of economic activity added to the moderation in inflation should support a decline in poverty to 22.3% in 2027. " Continued efforts to mobilize domestic resources and a rebalancing of the composition of debt in favor of domestic debt, in line with medium-term revenue mobilization and debt strategies, should enable Benin to maintain its macroeconomic stability, which is critical for attracting private investment and supporting the ongoing economic transformation." says Mamadou Tanou Baldé, World Bank Economist and Lead author of the report. The second part of the report focuses on domestic revenue mobilization while protecting the poor. The simplification of tax policy and the digitization of tax collection processes have improved the quality of services and secured revenue collection. Revenue mobilization in Benin has steadily increased since 2016 and has demonstrated resilience in the face of various shocks, including border closures with some neighboring countries, the COVID-19 pandemic, the rising cost of living in 2022, and insecurity. Tax revenue, the main driver of revenue growth, increased from 9.2% of GDP in 2016 to 13.2% in 2024, an increase of 4% over the period. Despite this progress, the gap with its peers remains and Benin needs to increase domestic revenue mobilization to finance its development plan. While Benin's fiscal system reduces inequality by 3 Gini points, an improvement in the fiscal system, including a mix of more targeted taxes and transfers, could lift more than 100,000 people out of poverty each year while continuing to mobilize more resources. " To improve the situation, Benin should strengthen social safety nets, implement more progressive taxation and increase social spending more targeted at the poorest to improve the redistributive impact of its fiscal policies," adds Arthur Alik-Lagrange, World Bank Lead Economist and co-author of the report. Distributed by APO Group on behalf of The World Bank Group.
