Rating agency Standard and Poor’s warns to downgrade El Salvador if Bukele’s government does not apply “corrective fiscal actions”

The agency maintains a B- rating for the country with a “stable” outlook as it is confident that the country will get external support in 2021.

The risk rating agency Standard and Poor’s confirmed this Thursday that it maintains its B- rating with a stable outlook for the country because it has expectations that “El Salvador will continue to receive significant external support in 2021 that will provide liquidity and limit refinancing risk. of sovereign debt in the next 12-18 months.

However, the rating agency warned that it could lower this rating in the next 12 months if it faces difficulties in accessing financing from official creditors and international markets “and does not implement corrective fiscal actions, which, in turn, could stress local market conditions. ”Says the statement.

“We could also downgrade the sovereign rating if the economic recovery is delayed, which would affect long-term trend GDP growth and keep fiscal deficits high for longer than we currently expect,” the US agency said.

Bukele’s government negotiates an agreement with the International Monetary Fund

And on the contrary, in an optimistic scenario the agency affirms that it could affirm that it could raise the ratings during the next 12 to 18 months if the economic recovery is more vigorous than expected and translates into stronger fiscal and external results, which it would herald a substantial decrease in the debt burden.

“We hope that the government will make gradual progress in the implementation of its plans to boost economic growth and strengthen public finances,” states the document released today.

The considerations of the risk rating agency come amid the confirmation of the Government that it has initiated conversations with the International Monetary Fund (IMF) with which it would seek financing for at least $ 1.3 billion and a series of fiscal measures that would allow it greater confidence of other economic institutions.

Leave a Comment