On January 7, 2025, Fitch Ratings upgraded El Salvador's credit rating to B- from CCC+, while maintaining a stable outlook. This change is attributed to a reduction in the country's financing needs, bolstered by a recent agreement with the International Monetary Fund (IMF) for a $1.4 billion loan program aimed at supporting government reforms.
The new B- rating places El Salvador six notches into the speculative grade, or junk status. The IMF's agreement, announced last month, is expected to facilitate fiscal consolidation measures, which, along with a decrease in short-term debt owed to domestic banks and the buyback of external debt, should alleviate financing pressures on the government.
Fitch anticipates that successful implementation of these fiscal measures could enhance investor confidence and pave the way for future debt issuances. President Nayib Bukele expressed his approval of the upgrade through a post on social media platform X.
Looking ahead, Fitch projects that Salvadoran economic growth will decelerate to 1.9% in 2024, down from 3.5% in 2023, before rebounding to an estimated 2.3% growth in the following year, despite the persistent heavy debt burden facing the government.