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Fitch Ratings Warns Of El Salvador’s Default Risk

Fitch Ratings downgraded El Salvador’s long-term foreign currency issuer default rating (IDR) to “CC” from “CCC,” noting the country’s poor cash situation as a January bond maturity date approaches.
Fitch Ratings Warns Of El Salvador's Default Risk 4

The move reflects Fitch’s view:

“El Salvador’s tight fiscal and external liquidity positions and extremely constrained market access amid high fiscal financing needs and a large $800 million external bond maturity in January 2023 make the default of some sort probable.”

Fitch predicts that El Salvador will require around $3.7 billion in financing between now and January 2023, with an unidentified funding gap of approximately $900 million.

El Salvador, which designated Bitcoin legal money alongside the US dollar in September 2021, has been struggling with larger funding issues as it approaches its next debt due date.

According to publicly accessible statistics, the nation is also facing huge unrealized paper losses on its Bitcoin acquisitions, which number 2,381 so far.

Nayib Bukele Portfolio Tracker

Three days ago, this Central American country officially offered to spend $360 million, instead of $560 million previously proposed, to buy back voluntary bonds representing debt due in 2023-2025.

According to Fitch, El Salvador’s buyback plan will likely further weaken its already strained liquidity position. The size and scope of the transaction do not significantly change the probability of default.

Fitch Ratings Warns Of El Salvador's Default Risk 5

This is the second time Fitch has downgraded El Salvador’s IDR. After a wave of protests and criticism around the globe, President Nayib Bukele’s Bitcoin plan has faced criticism from the world’s top credit agencies.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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Harold

CoinCu News

Harold

With a passion for untangling the complexities of the financial world, I've spent over four years in financial journalism, covering everything from traditional equities to the cutting edge of venture capital. "The financial markets are a fascinating puzzle," I often say, "and I love helping people make sense of them." That's what drives me to bring clear and insightful financial journalism to the readers of Coincu.

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