(Reuters) – S&P International (NYSE:) Rankings mentioned on Friday it may reduce El Salvador’s already detrimental credit standing inside six to 18 months if it doesn’t make “sufficient progress” on debt discount, days after the federal government introduced plans to purchase again sovereign bonds.
S&P maintained El Salvador’s “CCC-plus” ranking, seven notches into non-investment speculative grade territory, 4 days after its authorities mentioned it will purchase again as much as $360 million of two sovereign bonds, at what S&P valued simply marginally above market costs.
El Salvador launched the supply on Monday for a bond maturing in 2023 and 2025.
“We take into account the debt repurchase opportunistic and akin to a legal responsibility administration operation, given we imagine the federal government may have fulfilled its monetary commitments within the close to time period absent this transaction,” S&P mentioned in an announcement.
The scores company mentioned there was no less than a “one-in-three” probability of a downgrade if the federal government doesn’t make vital progress on its debt or if any points come up on its willingness to pay.
Fitch downgraded El Salvador’s sovereign debt to “CC” from “CCC” on Thursday, describing a debt default as possible.
S&P mentioned it believed the federal government may meet its debt service funds over the following 12 months, however added that delays in acquiring funding and corrective fiscal measures may hit investor confidence.
It mentioned the scores mirrored long-standing difficulties in predicting coverage responses, low financial output, persistently low funding and little flexibility as a result of dollarization of the financial system, which has endured since El Salvador launched bitcoin as authorized tender alongside the U.S. greenback.
President Nayib Bukele, who led the push to simply accept bitcoin, mentioned on Thursday he would run for re-election in 2024, regardless of the structure’s prohibiting presidents from serving consecutive phrases.
