Fitch Ratings, one of the “big three” credit rating agencies, has lowered El Salvador’s long-term issuer default rating (IDR). In a Wednesday report, Fitch pinned the nation’s debt repayment capacity at a mere CCC from the previous B-. The downgrade stems primarily from El Salvador’s big bitcoin bet.
El Salvador had previously secured a credit rating of B-, meaning that it had a slight margin of safety despite having a significant material risk of default. According to Fitch, the Central American country has an over-reliance on short-term debts which is ruining its ability to repay all its debts in general.
El Salvador currently faces almost $1.2 billion in debt amortizations, with an $800 million Eurobond expected to mature in January next year. Fitch also noted that the country has a financing gap of $1.2 billion in 2022, which is likely to soar to as high as $2.5 billion in 2023.