Standard & Poor's and Fitch Ratings both downgraded New Zealand's sovereign rating on, citing the cost of earthquake recovery and the country's worsening external debt position. S&P on Thursday cut New Zealand's long-term foreign currency rating to "AA" from "AA+" and the long-term local currency rating to "AA+" from "AAA", several hours after Fitch also downgraded New Zealand one level to "AA". Massive reconstruction work estimated at more than NZ$15 billion ($11.5 billion) is under way after February's earthquake in Christchurch, which levelled parts of the country's second-largest city and killed 181 people. S&P said the downgrade "follows our assessment of the likelihood that New Zealand's external position will deteriorate further at a time when the country's fiscal settings have been weakened by earthquake-related spending pressures and fiscal stimulus to support growth." The ratings agency said New Zealand's external debt, which hit 70 percent of annual gross domestic product (GDP) in June, was exacerbated by high household and farm sector debt, reliance on commodity income and an ageing population. S&P sovereign credit analyst Kyran Curry said the outlook for New Zealand's rating was stable but could come under pressure again if the country's external position continued to deteriorate. "The stable outlook balances the stabilisation we expect between the government's debt profile over the medium term and risks associated with the country's high external debt," he said. Fitch said New Zealand's current account deficit, which reflects a structural imbalance between savings and investment, is set to climb to 4.9 percent of GDP next year and 5.5 percent in 2013. "New Zealand's high level of net external debt is an outlier among rated peers -- a key vulnerability that is likely to persist as the current account deficit is projected to widen again," said Andrew Colquhoun, Fitch's Head of Asia-Pacific Sovereigns. The agency noted that New Zealand had one of the highest levels of household indebtedness among developed countries at 150 percent of disposable revenue, a figure which has not declined significantly since 2008. "Nonetheless, New Zealand remains well placed among the world's highly rated sovereign credits, with its creditworthiness supported by moderate public indebtedness, fiscal prudence, and strong public institutions," it said. The New Zealand dollar slumped 1.23 US cents to 76.59 US cents after the downgrades, while the benchmark NZX 50 was up 0.97 percent at 3,332.13. Goldman Sachs economist Philip Borkin said the downgrade could make borrowing more difficult in New Zealand, delaying central bank plans to lift interest rates from a record low of 2.5 percent over the next six months. "If funding pressures do intensify, this is one key factor, that would delay any interest rate hikes from the RBNZ in our eyes," he said in a note to clients.