Fitch Ratings Upgrades El Salvador

(Reuters) – Fitch Ratings upgraded its rating for El Salvador to B- from its prior CCC+ status, along with a stable outlook. This upgrade is attributed to a reduction in financing needs, aided by a recently announced International Monetary Fund (IMF) program.

The B- rating is still classified as speculative grade or junk status, being six notches into that category.

Last month, the IMF announced a staff-level agreement with El Salvador on a new loan program worth approximately $1.4 billion to support government reforms.

“Fitch expects the program to support the implementation of fiscal consolidation measures which, combined with the reduction in outstanding short-term debt owed to domestic banks and the buyback of external debt—due to last year’s liability management operations—should reduce financing needs,” stated the ratings agency.

Fitch noted that successful fiscal consolidation could enhance investor confidence and potentially enable future debt issuances.

In a post on X, President Nayib Bukele expressed his enthusiasm by stating, “Hooah!” celebrating the upgrade.

Fitch anticipates that Salvadoran economic growth will slow to 1.9% in 2024, down from a 3.5% expansion in 2023, and is projected to rise to 2.3% growth this year despite the government’s significant debt burden.