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Moody's upgrades El Salvador, affirms stable outlook

Moody's upgraded El Salvador's long-term issuer and senior unsecured debt ratings to B3 from Caa1 and affirmed its stable outlook, citing reduced government liquidity risks and a less confrontational political condition which lower the risk of missed debt payments.

The Latin American country's long-term foreign-currency bond ceiling and long-term foreign-currency deposit ceiling were also upgraded to B1 from B2.

The rating agency said the approval of $350.1 million in long-term financing to cover the government's needs in 2018 and the $5.5 billion budget approved in January reduced the country's government liquidity risks.

"After an agreement was reached on this year's budget and its financing, the government will no longer have to rely on these measures to meet its payment obligations," it added.

Moody's said it expects a completed deal between the government and the opposition later this year or in early 2019 to approve long-term debt issuance to refinance El Salvador's $800 million bond due December 2019.

The political climate has been less confrontational, according to Moody's, which helped political parties work together despite their differences. The rating agency cited completed agreements on pension reform in September 2017, long-term debt issuance in October 2017 and approval of this year's budget and its accompanying financing.