El Salvador's credibility would benefit from IMF deal - Moody's
Reuters
Published May 19, 2022 02:13PM ET
By Jorgelina do Rosario
LONDON (Reuters) - El Salvador lacks credibility in managing its finances and would benefit from a program with the International Monetary Fund, an official at ratings agency Moody's (NYSE:MCO) said on Thursday.
Ariane Ortiz-Bollin, vice president and senior credit officer at Moody's, told Reuters the Salvadoran economy is doing relatively well and revenues have climbed, but "it's more about the certainty on the policy predictability that comes with an IMF agreement, which is something that the country is significantly lacking right now."
Salvadoran foreign debt yield spreads to U.S. Treasuries hit a record high above 2,600 basis points on Thursday, as the Central American nation of 6.5 million continues to be shut out of international financing markets.
Moody's earlier this month cut its key rating on El Salvador by two notches to Caa3, its third-lowest rating, citing "an increased probability of a credit event."
Graphic: El Salvador sovereign bond spreads to U.S. Treasuries - https://graphics.reuters.com/ELSALVADOR-DEBT/SPREADS/lgvdwgrbrpo/chart.png
The IMF said on Thursday it has been in talks with the Salvadoran government on issues including the pace and composition of fiscal consolidation, anti-money laundering issues, fiscal transparency and accountability on the use of public funds.
They have also discussed the use of bitcoin, which was given legal tender status in El Salvador in September in a move criticized by the IMF, but the Fund did not mention any resumption of talks leading to a new program.
"It is a surprise to us that they're not willing to go this path," said Ortiz-Bollin, adding a new IMF program "would unlock other multilateral financing and potentially market financing that is badly needed."
El Salvador's bet on bitcoin has failed so far, with the cryptocurrency down more than 40% of its value since Salvadoran adoption. The increased risk has closed down other avenues of financing.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.