THIRUVANANTHAPURAM: Global rating agency Fitch has revised Kerala’s long-term financial outlook from ‘negative’ to ‘stable’, in its latest report. Finance Minister KN Balagopal said on Saturday that this revision serves as a commendable endorsement for the state government’s endeavours towards fiscal consolidation and proficient financial management.
Fitch affirmed the ratings at ‘BB’, with the minister attributing this positive development to the enhancement in revenues and economic growth resulting from COVID-related packages. The agency acknowledged the sustained growth momentum in both the state and national economies following the COVID-19 pandemic, despite uncertainties in the global economy and the slowdown in global trade.
“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. That said, the state’s economic expansion should adequately offset the increased debt burden, resulting in steady debt ratios,” the agency said in a release.
Fitch has assigned an overall ‘midrange’ risk profile to the state, based on the assessment of six risk factors. Kerala’s robust revenue profile is grounded on a steadfast underlying economy, resilient revenue sources, and a supportive framework of federal transfers.
“We foresee the medium-term continuation of economic growth, contributing to a steady rise in revenue. Operating revenue growth displayed robustness in the five years leading to FY22, boasting a Compound Annual Growth Rate (CAGR) of 10.0%,” the statement said.
KEY ASSUMPTIONS
Risk Profile: ‘Midrange’
Revenue Robustness: ‘Stronger’
Revenue Adjustability: ‘Weaker’
Expenditure Sustainability: ‘Midrange’
Expenditure Adjustability: ‘Midrange’
Liabilities and Liquidity Robustness: ‘Stronger’
Debt sustainability: ‘bbb’