It is a first setback for Nayib Bukele’s government, because in the issuance of bonds for $1 billion, it must get at least two of these entities to improve their rating so as not to raise the interest rate.
S&P Global Ratings holds El Salvador’s sovereign risk rating firm for the persistent fiscal risks, in its most recent report.
The agency is the first to pronounce after the announcement that El Salvador would go out, for the first time in 4 years, to the international market to obtain financing, specifically for the repurchase of bonds.
The agency therefore maintains El Salvador’s rating in “B,” with a stable perspective. This is assigned to sovereigns with speculative degrees: they have the capacity to fulfil their obligations, but they are vulnerable to economic and financial conditions.
The stable outlook indicates that our balanced view of risks between El Salvador’s mid-term fiscal relief of the debt refinancing process initiated in 2022, and persistent fiscal and debt risks, as debt service payments remain high and financing alternatives are somewhat limited, the agency explained in a statement.
That the agency keeps the rating is a first setback for the Nayib Bukele government, because in the issuance of bonds for $1 billion, it must get at least two of these entities to improve it. If it does not, you will have to pay investors 0.25 per cent interest in the first six months.
After 18 months, if the conditions remain the same, it will increase by 4 %. In other words, the government will have to cancel its creditors an extra 16 per cent of its investment.
This article has been translated from the original which first appeared in El Salvador