Moody's removes the label of unreliable from the Generalitat's debt
The agency raises the Catalan government's solvency rating to Baa3, out of the junk bond rating and within the moderate risk category.
BarcelonaWithout a budget, but with an improved credit rating. Moody's, one of the major credit rating agencies, has upgraded the Catalan government's solvency rating to Baa3, moving it from speculative to more reliable investment grade. It also improved the rating of Barcelona City Council, in addition to 13 other regional governments, such as Valencia and the Basque Country. The rating for Catalonia is the same as, for example, Italy's.
The upward revision improves the rating the agency itself set for the Catalan government's debt in March of last year, when it was still considered a "questionable" credit quality rating. It is now considered a "moderate risk." The Minister of Economy, Alícia Romero, emphasized that the agency's decision strengthens Catalonia's "economic image and solvency." The agency maintains a stable outlook for the Catalan government's debt.
The new rating moves the government out of the junk or speculative category and into the more reliable investment category, according to this agency's classification. The Catalan government's main creditor is the state, currently through the regional liquidity fund (FLA). The Catalan government's goal, which has already secured financing from major banks, is to begin tapping the markets to obtain at least 5% of its total debt and gradually increase its share: In 2026, it would represent 5% of the total debt; in 2027, 10%; in 2028, 15%; and in 2029, 20%..
In any case, the high volume of the Generalitat's financing needs means that it must continue to rely heavily on liquidity mechanisms such as the FLA. According to government forecasts, this will continue until at least 2036. The total government debt was €90.7 billion as of June 30, of which more than 86% is owed to the State, according to data from the Bank of Spain.
Moody's rating for the Generalitat's debt comes just days after it also raised the Spanish government's rating from Baa1 to A3 and changed the outlook from positive to stable due to the improving economy and improvements in the labor market and the banking sector.
The other ratings held by the Generalitat for its debt areBBB from Fitch Rating since November of last year and the same rating from DBRS since June of that year.