American credit rating agency Fitch Ratings has just downgraded El Salvador’s long-term default rating from B- to CCC. The main reasons for this decision were reportedly the unpredictable conduct of politics and the adoption of BTC as legal tender in the country.
Among other things, the decision to downgrade El Salvador was due to the country’s short-term debt of $800,000 million, which must be repaid before 2023. According to the report, the high budget deficit has also played its role in what happened.
It is worth mentioning that the company has focused on the fact that in the future it will be very difficult for El Salvador to return to its previous position in the rating, since it will be more difficult for the state to repay the total debt against the backdrop of a solid short-term debt. So, for example, in August, September and October 2021, El Salvador’s monthly loan payment reached $1.3 billion.
After analyzing all the “pluses” and “minuses” in Fitch Ratings, the agency has concluded that today El Salvador is in a financially unstable situation. Accordingly, according to the criteria of the rating agency, the positions of the state were downgraded.