S&P says it may downgrade El Salvador's credit rating in 6 to 18 months

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S&P says it may downgrade El Salvador's credit rating in 6 to 18 months

On Friday, S&P Global Rating had issued a statement saying that the New York City-based global rating agency might slash El Salvador’s credit rating further into a non-investment speculative grade category, if the island country could not push forward to offload its debt burdens.

In the matter of the fact, latest move from S&P Global comes over the heels of an announcement from the Government of El Salvador, the world’s first country which had adopted bitcoin as a legal asset, that, the country’s Central Bank would repurchase sovereign bonds.

To be precise, just four days after the El Salvadorian Government had committed to a bond repurchase program that might span up to $360 million in two sovereign debts, S&P Global had decided to maintain the country’s rating at “CCC-plus”, seventh place into non-investment speculative grade territory.

On top of that, on Monday, El Salvador had launched an offer for bonds maturing in 2023 as well as 2025. Meanwhile, S&P Global said in a statement, “We consider the debt repurchase opportunistic and akin to a liability management operation, given we believe the government could have fulfilled its financial commitments in the near term absent this transaction”.

S&P says it could downgrade El Salvador’s credit rating

Nevertheless, Fitch, one of the three largest credit rating agencies across the globe alongside S&P and Moody’s, had downsized EL Salvador’s Government bond rating to “CC” from an earlier “CCC” later last week citing that a debt default could be imminent.

However, S&P Global maintained an optimistic tone adding that the country’s Government might just be able to repay its debt obligations by next year. El Salvador had legalized and accepted Bitcoin-based deFi (Decentralized Financing) back in the September of 2021 in the height of a pandemic which had been curbing out the tourist-dependant nation’s FX reserves, while a sharp depreciation in value of Bitcoin has lassoed down the country’s crypto mining industry over recent past as Bitcoin’s legalization and related investments would likely to boomerang the economy.