Prague City Council has been informed of its up-to-date credit rating from Moody’s, an international credit rating agency. The capital has defended its current rating assessment at the Aa3 level with a negative outlook.
According to the agency, Prague’s credit profile reflects the city’s consistently strong economic position, its prudent financial management, and the high probability that the government of the Czech Republic (which also has an “Aa3 negative” rating) would provide support if the city were to face an acute lack of liquidity. Prague’s credit evaluation therefore remains at a very high level.
“I’m glad that Prague has achieved such a high-quality rating, which puts us on the same level as Ireland, Belgium or Taiwan,” said Zdeněk Kovářík, City Councillor for Finance and Budget. “The rating firm thus confirmed that the city’s finances are in good shape and that the city is a solid partner for investors. I firmly hope that the macroeconomic situation of the Czech Republic will improve enough for us to reach the Aa3 rating with a stable outlook in the next update.”
Credit ratings are important indicators used by potential and existing investors who have granted the city a loan or bought city bonds. For example, in the case of the city’s existing obligations to the European Investment Bank, the rating assessment is taken into account within the contractual terms.
The ‘negative’ outlook reflects the overall negative trends in the Czech economy and its effect on the economic and financial ties between the Czech government and regional and local governments. Because of these ties, Prague’s outlook could change to stable if the Czech Republic’s rating stabilises, provided that Prague maintains its current high liquidity and low levels of debt.
Prague continues to generate operating surpluses, which are a significant source of capital expenditure financing, while maintaining its extensive liquidity reserve. The city’s rating is limited by the flexibility of income, which is dependent on the performance of the national economy.
