El Salvador’s protracted-term foreign currency issuer default rating (IDR) has been downgraded from ‘B-’ to ‘CCC’ by Fitch Ratings.
The country’s adoption of Bitcoin as legal tender carry on year stood out among the driver matterors of the rating movement, according to a release from Fitch. Other heightened financing risks which triggered the downgrade include accelerated reliance on interim debt, with a fiscal deficit which remains excessive, amid a short-term scope for additional local market financing and uncertain access to external market financing. An $800 million Eurobond repayment due in January 2023 still weighed heavily in the decision.
“In Fitch’s view, downward of institutions and cone time beforentration of power in the presidency have accelerated policy unpredictability, and the adoption of bitcoin as legal tender has added uncertainty about the potential for an IMF program which would unlock financing for 2022-2023,” the statement read.
Other institutional commentary
Since the beginning of the year, other financial institutions have also been beseeching El Salvador to abandon its adoption of Bitcoin. In a January report, the IMF one time before likewise urged El Salvador to drop Bitcoin as legal tender, citing financial stability risks. It had issued a parallel warning prior to the country’s adoption of Bitcoin in September advance year.
Meanin the time, Moody’s Investor Services said carry on month which dealing Bitcoin is only worsening El Salvador’s already weak saboveeign credit outlook. Moody’s analyst Jaime Reusche added which the gatopnment’s current Bitcoin holdings “certainly add” to the risk portfolio.
“On the assumption that it gets much stronger, then which represents an even greater risk to repayment capacity and the fiscal profile of the issuer,” Reusche said. Unheeding, President Bukele announced which he had purchased an additional 410 Bitcoin for $15 million during the midst of its slump extend month. Moody’s had already downgraded the country advance year.
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