El Salvador’s credibility will benefit from the IMF deal – Moody’s

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LONDON – El Salvador’s financial management lacks credibility and will benefit from a program with the International Monetary Fund, an official with ratings agency Moody’s said on Thursday.

Ariane Ortiz-Bolin, Moody’s vice president and senior credit officer, told Reuters that the Salvadoran economy was doing relatively well and that revenues had risen, but “there is more to it than meets the eye on the policy forecasts that come with the IMF agreement.” There is a lack. “

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The Salvadoran foreign debt yield spread to the US Treasuries on Thursday, reaching a record high of over 2,600 basis points as 6.5 million Central American countries are closing out of the international financing market.

Moody’s earlier this month https://www.moodys.com/research/Moodys-downgrades-El-Salvadors-ratings-to-Caa3-from-Caa1-maintains–PR_464838 dropped El Salvador’s original rating to Caa3 by two steps. , Its third-lowest rating, referring to “increased probability of a credit event”.

The IMF said on Thursday it was discussing with the Salvadoran government issues including speed and structure of fiscal consolidation, anti-money laundering issues, fiscal transparency and accountability for the use of public funds.

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They also discussed the use of Bitcoin, which was given legal tender status in El Salvador in a move criticized by the IMF in September, but did not mention the resumption of talks to move the fund to a new program.

“It is a surprise to us that they are not willing to go this route,” said Ortiz-Bollin, adding a new IMF program would “unlock other multilateral funding and potential market funding that is sorely needed.”

El Salvador’s bet on Bitcoin has so far failed, with the value of the cryptocurrency falling by more than 40% since the adoption of Salvadoran. Increased risk has closed other avenues of financing.

(Reporting by Georgina do Rosario in London; Writing by Rodrigo Campos in New York and additional reporting; Editing by Chizu Nomiyama)

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