Moody's cuts El Salvador

Moody's Investors Service said it downgraded the government of El Salvador's long-term foreign-currency issuer and senior unsecured ratings to Caa1 from B3.

El Salvador faces constrained market access ahead of a challenging debt amortization schedule beginning in 2023, the agency noted.

Also, Moody’s cited a weakening in the quality of policymaking that has intensified implementation risks to the authorities' fiscal adjustment plans and increased uncertainty about financing prospects.

“Although Moody's has incorporated the potential funding flows from a possible IMF program in its analysis of El Salvador's funding prospects for 2022, the rating agency believes that even if an agreement is reached with the IMF on a financing program, issues involving the sovereign's high cost of funding are unlikely to be fully addressed by official funding flows,” the agency said in a press release.

The outlook remains negative.

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