Moody’s eyes El Salvador for downgrade

Moody’s Investors Service said it placed El Salvador’s B3 issuer and senior unsecured ratings on review for possible downgrade.

“The key driver behind the decision is the government’s high liquidity risk due to a large increase in gross financing needs, tight external financing conditions and limited ability to increase reliance on the domestic market. Moody’s expects El Salvador’s fiscal deficit to reach 11% of GDP in 2020, exceeding the rating agency’s previous estimate of 8.5% back in May.” Moody’s said in a press release.

The review will allow Moody’s to assess the administration’s policy response to address financing constraints and evaluate if the government’s fiscal consolidation plans for 2021 and beyond will prove useful in assuring debt sustainability, the agency said.

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