Fitch Ratings has upgraded El Salvador's credit rating to B- following a $1.4 billion IMF loan agreement, citing reduced financing needs and progress in fiscal reforms.
Fitch Ratings has upgraded El Salvador's long-term foreign currency debt rating to B- from CCC+, reflecting reduced financing needs and improved economic stability. The credit rating agency also assigned a stable outlook to the Central American nation. This upgrade comes in the wake of El Salvador’s recently announced loan program with the International Monetary Fund (IMF).
El Salvador’s credit rating has been upgraded by Fitch to B- from CCC+, citing reduced financing needs and improved access to funding. pic.twitter.com/2YgYf43fdb
— TFTC (@TFTC21) January 7, 2025
The IMF staff-level agreement, secured last month, offers El Salvador a $1.4 billion loan package to support ongoing government reforms. According to Fitch, the IMF program is expected to enhance fiscal consolidation efforts, reduce short-term debt obligations, and improve investor confidence. The agency also highlighted the successful liability management operations conducted last year, which included external debt buybacks, as a critical factor in reducing financing pressures.
“Fitch expects the program to support implementation of fiscal consolidation measures which... should reduce financing needs,” the agency stated. These efforts are projected to create a more stable fiscal environment, paving the way for potential future debt issuances.
President Nayib Bukele celebrated the upgrade on X (formerly Twitter), writing, “Hooah!” to mark the milestone. This marks a significant turnaround for El Salvador, which had faced mounting concerns over its heavy debt burden and speculative-grade credit status.
Despite the improvement, El Salvador’s credit rating remains six notches into speculative-grade territory, commonly referred to as "junk" status. Fitch predicts the country's economic growth will slow to 1.9% in 2024, down from 3.5% in 2023. However, growth is expected to pick up slightly to 2.3% in 2025, buoyed by fiscal reforms and greater market access.
Fitch’s outlook suggests that sustained fiscal discipline and continued success in managing public debt could further enhance investor confidence. The rating agency noted that while challenges remain, including El Salvador’s high debt levels, the IMF program and recent reforms offer a foundation for improved economic resilience.
