Fitch Ratings, the international rating agency, upgraded Bulgaria's long-term foreign currency rating to "BBB" from "BBB-" and local currency rating to "BBB+" from "BBB". The country ceiling is also upgraded to "BBB" from "BBB-". The short-term rating is affirmed at "F3". Following the upgrade, the outlook is now stable.

"Bulgaria's sovereign credit fundamentals are underpinned by sound fiscal policy and falling government debt, large foreign direct investment inflows, as well as rapid and sustainable growth. They are also supported by the good prospects for economic policy continuity with the government that has emerged from the June elections," says Nick Eisinger, Fitch Analyst for Bulgaria.

In a statement the agency points that the three parties that form the new coalition government share common views on the need to maintain a prudent fiscal policy, to uphold the strictures demanded by the currency board arrangement and to finalise the reforms needed to secure Bulgaria's accession to the European Union (EU). Fitch still expects this to occur in January 2007, despite some outstanding judicial reforms and a more fluid situation within the EU itself, although the chances of a one-year deal to EU entry have increased.

The agency expects a second consecutive year of fiscal surplus (over 1% of GDP) in 2005 and warns that the current account deficit remains a weak spot of an otherwise strong fiscal position.