Suriname's credit rating was upgraded by Moody's Ratings as major drillers approved projects to develop the first oil discoveries off the coast of the tiny South American nation.

The firm raised Suriname's rating to Caa1 -- seven levels into junk -- from Caa3 and changed the outlook to positive from stable, citing the anticipated "economic and fiscal windfalls" tied to the major offshore oil project in a statement released Tuesday.

"We expect the start of the oil production to lead to a period of very high growth rates, and government revenue from the project to be very large relative to its debt stock and gross financing needs," wrote analysts including David Rogovic and Mauro Leos.

The upgrade also reflects the "significant reduction" in government debt after Suriname implemented fiscal and economic reforms over the past three years, which resulted in a primary surplus and will likely lead to further decline in debt burden, according to the statement.

S&P Global Ratings rates the country at CCC+ with a stable outlook.