Moody’s lowers El Salvador to B3

Moody's Investors Service said it downgraded El Salvador's issuer and long-term debt ratings to B3 from B1 and assigned a negative outlook to the ratings, concluding the review for possible downgrade initiated on Aug. 11.

Moody’s said the downgrade is based on the following key drivers:

• The significant increase in liquidity risks as: (a) The government is already under financial stress and has been forced to prioritize payments; and (b) short-term debt continues to rise reaching record-high levels that are starting to challenge local banks' capacity and willingness to absorb additional amounts; and

• The political impasse in the legislative assembly that leaves the government without necessary approval to issue long-term debt to retire short term debt and fund its operations.

El Salvador's long-term foreign-currency bond and deposit ceilings were lowered to B1 from Ba2. Short-term foreign-currency bond and deposit ceilings remain unchanged at NP.

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