Fitch Ratings has revised the outlook on Kerala to ‘stable’ from ‘negative’ while retaining a ‘BB’ rating for the State’s long-term foreign and local currency issuer default ratings (IDR).
The revision of the outlook to stable reflects an improving trend in the aftermath of the COVID-19 pandemic, the latest ratings published on August 25 said.
It noted that the State’s economic expansion should adequately offset the increased debt burden, resulting in steady debt ratios.
“We expect sustained economic growth to support the State’s steady fiscal performance to the fiscal year ending March 2027 (FY27), although the State’s broad expenditure responsibilities and large infrastructure investment will lead to ongoing fiscal deficits and a steady rise in borrowings,’‘ it said.
Finance Minister K.N. Balagopal, addressing a press conference here, welcomed the revision from negative to stable.
In October last year, the rating agency had revised the outlook on the State to negative from stable, while keeping the ‘BB’ rating.
In its latest assessment, Kerala’s stand-alone credit profile has been retained at ‘BB,’ reflecting a ‘Midrange’ risk profile and a ‘bbb’ rating in the matter of debt-sustainability.
The State was evaluated across six risk factors, assessed as ‘stronger’, ‘mid-range’ or ‘weaker.’ Revenue robustness was assessed as ‘stronger,’ and revenue adjustability as ‘weaker.’ Other evaluations are as follows: expenditure sustainability (mid-range), expenditure adjustability (mid-range), liabilities and liquidity robustness (stronger), and liabilities and liquidity flexibility (mid-range).
