July 24 Moody's Investor Service raised Portugal's government bond rating on Friday to "Ba1" from "Ba2", citing the expectation that the country's fiscal consolidation remains on track.
Portugal's highest court in May struck down several budget measures, including some public sector salary cuts, creating a fiscal gap of about 700 million euros this year.
"The first driver behind the upgrade is Moody's view of the government's strong commitment to fiscal consolidation, despite repeated set-backs stemming from the adverse rulings of the country's Constitutional Court," Moody's said on Friday. (bit.ly/1phcEXF)
Portugal has undertaken several austerity and reform measures since the European debt crisis that rocked global markets.
The ratings agency assigned a stable outlook to the government bonds but said that the country's high external debt was a key credit weakness. (Reporting By Narottam Medhora in Bangalore; Editing by Joyjeet Das)