Moody’s Ratings raised El Salvador’s credit rating by two notches, attributing the improvement to the Salvadoran government’s latest bond repurchase in April. The stable outlook was also maintained following the bond buyback made by re-elected president Nayib Bukele.
According to Moody’s, the reduction in credit risks for El Salvador was significant, moving from very high risk levels to lower probabilities of liquidity stress episodes. The operation reduced amortizations until 2027, leading to a stable outlook. The repurchase also included a new $1 billion issue with maturity in 2030, used to pay holders who accepted the offer.
Moody’s praised the government for extending the maturity profile of its domestic debt and reducing reliance on short-term instruments. The reduction in refinancing, coupled with moderate fiscal deficits, has decreased the government’s overall financing needs.
However, Moody’s highlighted that El Salvador still faces challenges such as weak institutions, governance issues, and a high susceptibility to event risks due to limited access to cross-border financing.
In mid-April, the Salvadoran government accepted the early purchase of bonds totaling $469.9 million, part of an initial offer to buy back bonds amounting to over $1.63 billion. This move follows similar operations in 2022, which President Bukele stated generated significant savings for the Salvadoran State.
As of the end of 2023, El Salvador’s total public debt exceeded $20 billion, with $12 billion in foreign debt and $9.9 billion in pension debt. This credit rating upgrade by Moody’s follows a similar move by Fitch Ratings last year, indicating a positive trend for the country’s financial outlook.