Sovereign credit ratings of most emerging market economies will be unaffected by the temporary foreign currency funding shortage, Moody's Investors Service said on Wednesday. The ratings agency said many emerging market economies had accumulated sufficient reserves to tide them over the short-term liquidity squeeze and some also had access to non-market funding in the form of bilateral, regional or multilateral assistance.
Others are also not sufficiently integrated into the world economy to be affected by the global financial crisis which has curbed the supply of foreign currency funding to banking systems in emerging economies. "Moody's key assumption in this report is that international financial integration is not unravelling - rather, the current shortage of foreign currency funding in the world economy, in its current extreme form, is temporary," it said in a statement.
But if the dearth of international bank lending plus capital outflows persisted into the first quarter of 2009, Moody's would have to review the sovereign ratings of emerging economies, it said. "Some countries have faced and will continue to face rating pressures," Moody's said.