© Reuters.
Investing.com – U.S. rating agency Fitch Ratings downgraded El Salvador’s long-term issuer default rating from B- to CCC, citing “policy unpredictability” and “the adoption of as legal tender” as some factors that led to degradation.
In addition, the ratings organization explained that dependence on short-term debt, payment of an $800 million bond due in January 2023 and a high budget deficit are preventing the country from get a better grade.
In addition, the increase in El Salvador’s short-term debt is seen by Fitch as hampering the government’s ability to pay all of its debts, which increases the risks of refinancing. With nearly $1.3 billion due in August, September and October, Fitch says financial constraints will be more difficult for the country to manage.
According to Fitch, the country also faces heightened risks of “high and growing financing needs” in the coming years. The firm mentions that the country’s use of BTC as legal tender contributes to uncertainty over a potential International Monetary Fund program that could provide the financing the country needs in 2022-2023.
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