Moody's Investors Service has upgraded Paraguay's government bond rating by one notch to Ba2 from Ba3, and changed the outlook to positive from stable. Moody's decision to upgrade Paraguay's rating was driven by the following factors: 1. The improving standing of Paraguay's key fiscal metrics relative to 'Ba' peer medians, 2. A strengthened institutional framework as a result of the legislation package that was approved last year, 3. A smooth political transition since the impeachment of former president Fernando Lugo in 2012. After the central government reported average debt ratios of 18% of GDP and 112% of revenues during 2003-2012, compared with the 39% and 149% for 'Ba'-rated medians during the same period, these debt ratios declined to just 12.7% of GDP and 79% of revenues in 2013. That is well below the 'Ba' medians of 36% and 151%, respectively. Debt affordability, as measured by the ratio of interest payment to revenues, is high at less than 2% (Ba median: 7.7%) owing to the largely concessional nature of Paraguay's debt. The country's average debt maturity is over 20 years. Although most of the government's debt is in foreign currency, Paraguay has a natural hedge since revenues from hydroelectric energy sales to Brazil and Argentina are US dollar-denominated.