Statements by Ms. Julieta Tavakalyan, Third Secretary of the Permanent Mission of Armenia to the UN at the ECOSOC Special Meeting on Credit Ratings

Panel 1: CREDIT RATINGS AND THE COST OF CAPITAL

Distinguished Chair,

Excellencies,
Dear colleagues,

At the outset, allow me to highlight the importance of today's discussion in deepening our understanding of the role of credit ratings in the international financial system. Credit ratings play an important role in shaping access to finance by reducing information asymmetries and signaling creditworthiness. In this sense, they are not merely technical assessments, but also market signals that influence access to finance.

At the same time, their impact on the cost of capital is not uniform and warrants careful consideration. While they contribute to the pricing of sovereign risk, borrowing costs are also influenced by broader factors, including investor sentiment and global financial conditions.

Armenia's experience reflects this dynamic. Over the past years, Armenia has pursued prudent macroeconomic policies, strengthened fiscal frameworks, and maintained close engagement with international financial institutions. These efforts have contributed to improving investor confidence and recent positive rating outlooks, which is also reflected in increased non-resident participation in Armenia's domestic government bond market. At the same time, Armenia, like many developing economies, continues to operate within global market conditions that influence borrowing costs and investor participation.

This points to a broader structural dynamic, namely that the distinction between investment grade and non-investment grade can have implications for capital flows, including through the sovereign ceiling effect on corporate borrowing. At the same time, it is important to recognize that credit ratings may, in certain contexts, interact with market cycles. During periods of stress, rating signals can coincide with heightened market volatility and more constrained financing conditions. Conversely, forward-looking improvements, including reforms and investments in resilience, may take time to be fully reflected.

In this context, we would highlight three areas for further reflection.

First, the need to strengthen the accuracy, objectivity, and long-term orientation of credit ratings, in line with the Sevilla Commitment. This includes better capturing reform trajectories, resilience, and long-term growth prospects.

Second, the importance of aligning rating methodologies with long-term investment horizons, including through greater use of scenario analysis and improved recognition of investments in sustainability and productive capacity.

Third, the need to reduce excessive reliance on mechanistic rating thresholds, avoiding cliff effects that can abruptly restrict access to finance, and encouraging a more diversified set of information inputs in investment decision-making.

Taken together, these underscore the importance of advancing a more balanced and development- oriented credit rating system.

I thank you.

PANEL 3: BOOSTING THE CAPACITY OF DEVELOPING COUNTRIES TO ENGAGE WITH RATINGS AND ASSESSMENTS

Distinguished Chair,

Excellencies,
Dear colleagues,

First, let me express appreciation to the panelists for their valuable insights. Strengthening the capacity of developing countries to engage effectively with credit rating agencies and financial market actors is an essential component of improving access to sustainable and affordable finance, and an important factor in ensuring fair and balanced assessments.

As mentioned before, many countries face constraints in understanding rating methodologies, producing high-quality data, and effectively communicating their economic policies and reform efforts. These capacity gaps can limit the extent to which national realities are fully reflected in credit assessments and, ultimately, in financing conditions, underscoring the importance of enabling countries to effectively communicate their economic narratives.

In this context, strengthening engagement with credit rating processes and market participants becomes particularly important. Experience across countries shows that sustained efforts to enhance transparency, data quality, and institutional frameworks can support more effective interactions with both rating agencies and investors, contributing to a clearer understanding of economic developments.

At the same time, there is scope to further strengthen these efforts, particularly as financial systems and assessment methodologies continue to evolve. In this regard, we would highlight several areas that merit particular attention.

• First, strengthening institutional and technical capacity, including in debt management, macroeconomic modelling, and statistical systems, to ensure the availability of reliable, timely, and comprehensive data.
• Second, enhancing investor relations and communication capacities within governments, enabling countries to better present their policy frameworks, reform efforts, and long-term strategies.
• Third, expanding targeted capacity-building and technical assistance, including through the United Nations system, international financial institutions, and regional organizations, with a focus on practical tools and peer learning.

Finally, we would like to highlight the importance of establishing more structured and continuous dialogue between Member States, credit rating agencies, and investors. In this regard, today's meeting marks an important first step under ECOSOC in fostering more regular, inclusive, and forward-looking engagement. ECOSOC has an important role as a platform to advance a more structured and continuous dialogue between Member States, credit rating agencies and investors.

I thank you.