Once again, Fitch has downgraded El Salvador’s long-term foreign currency issuer default rating to CC from CCC on Friday, further into junk territory. The country was the first to make bitcoin (BTC-USD) legal tender last year.
Fitch pointed to the nation’s weak fiscal liquidity positions “and extremely constrained market access amid high fiscal financing needs and a large USD800 million external bond maturity in January 2023 make default of some sort probable,” it said in a report.
El Salvador’s financing needs were estimated to be $3.7B from September through January 2023, including $1B in fiscal deficit, $1.2B in amortizations and $1.5B in short-term debt, Fitch noted.
The downbeat coverage followed Fitch’s previous downgrade of El Salvador to CCC from B-, arguing that its bitcoin (BTC-USD) adoption had added uncertainty about financing that would be unlocked by an International Monetary Fund program for this year and the next.
With bitcoin (BTC-USD) down some 70% from its November all-time high, El Salvador’s BTC holdings are valued at less than what it had invested initially. The token slipped 1% to $19.65K at 4:36 p.m. ET.
In January, IMF urged El Salvador to strip bitcoin of legal tender status.