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Portugal's junk rating is increasingly difficult for agencies to justify, says deputy finance minister

Portugal's economic progress in recent years makes it increasingly difficult for the three main rating agencies to explain why they have left Lisbon with a junk investment grade, a top government official told CNBC on Thursday.

Speaking on the sidelines of the International Monetary Fund spring meeting in Washington, Portugal's deputy finance minister argued domestic reforms in one of Europe's beleaguered economies should not be dismissed simply as an act of "smoke and mirrors".

Moody's, Standard & Poor's and Fitch rating agencies all currently list Portugal as below investment grade level, which means the cost of borrowing is higher on sovereign and corporate issuers.

"I would say that these three rating agencies will have increasing difficulties in explaining why and how they've maintained the rating for such a prolonged period of time when Portugal in '17 is very different from Portugal in '14," Ricardo Mourinho Felix told CNBC Thursday.

'Our story is credible'

DBRS rating agency, from which Portugal receives its sole investment grade rating, is scheduled to review its rating for Lisbon on Friday.

Rabobank analysts argued Portugal can expect DBRS rating agency to hold its stable outlook for the country on Friday despite a perceived weakening of political commitment to sustainable economic policies and deterioration in public debt.

"There are three big rating agencies that still remain below investment grade, that's true… (but) I think they are increasingly understanding that our story is credible and moving forwards," Felix said.

Meanwhile, the International Monetary Fund (IMF) recently raised its 2017 growth projections for Portugal as the Fund published its World Economic Outlook for 2017 on Tuesday.

The Washington-based institute had upwardly revised its projections for growth in Portugal to 1.8 percent by year-end from 1.1 percent. Despite the IMF's amendment, the forecast remains slightly less optimistic than Lisbon's government outlook.