A. M. The credit rating agency Fitch Ratings affirmed that the recent fiscal agreement between El Salvador and the International Monetary Fund (IMF) will ease the country’s financial restrictions and support its fiscal consolidation. According to the entity, this agreement will reduce the Salvadoran government’s financing needs and improve economic stability.
In a statement issued from New York and London, Fitch highlighted that the approval of the agreement with the IMF will strengthen the liquidity of the Salvadoran banking system. The agency emphasized that this support is key for the country’s financial stability and to improve investor confidence.
Fitch also emphasized that the broad majority of the ruling party in the Legislative Assembly will facilitate the implementation of the reforms agreed with the IMF. This, according to the rating agency, will be decisive for the fulfillment of the commitments acquired and to guarantee the sustainability of the fiscal adjustment in the coming years.
In fiscal terms, the agency projects an improvement in the primary balance of the non-financial public sector (NFPS) of approximately 3.5 percentage points of GDP over a three-year period. This deficit reduction will contribute to greater macroeconomic stability and reduce pressure on external financing.
The 2025 budget already contemplates measures to achieve an initial adjustment of 1.5 percentage points, and Fitch anticipates that there could be an even larger improvement this year, reaching 1.8 percentage points. As a result, the rating agency expects El Salvador to achieve a primary surplus of 1.2% of GDP in 2025.
Fitch highlighted that the agreement with the IMF has already had a positive impact on the country’s risk rating. In January, Fitch raised El Salvador’s rating from ‘CCC+’ to ‘B-‘ with a stable outlook, reflecting lower financing pressure. In addition, the agency recalled that the pact with the IMF seeks to improve transparency and regulation of digital assets in the country.
You may also be interested in
