S&PGlobal Ratings on Oct. 6 placed its B+ long-term and B short-term foreign andlocal currency sovereign credit ratings on El Salvador on CreditWatch withnegative implications.
The sovereign'stransfer and convertibility assessment of AAA is unchanged.
S&Psaid that the negative CreditWatch placement reflects the country'sdeteriorating financial management, reflected in a weakening of thegovernment's ability to gain access to liquidity, due to heightened politicalpolarization. A political stalemate between the ruling Frente Farabundo Martípara la Liberación Nacional party and the main opposition Alianza RepublicanaNacionalista is also leading to rising economic costs, among other factors,S&P added.
The ratingagency noted that El Salvadoran President Sanchez Ceren's administration hasbeen unable to acquire congressional approval for external debt issuance plans,and as a result the country has accumulated about $1 billion in short-termlocal debt. And while BancoCentral de Reserva de El Salvador can repay maturing obligationswith new debt through a trust, S&P noted that the move only providestemporary relief.
The ratingagency said that it expects to resolve the CreditWatch by year-end, based onthe outcome of political negotiations on fiscal policy and a proposed newfiscal discipline law.
S&P Global Ratings and S&P GlobalMarket Intelligence are owned by S&P Global Inc.