S&P Global Ratings on Dec. 28 upgraded its sovereign credit ratings on El Salvador after the country's congress approved a 2019 budget that includes new external debt to cover existing obligations.

The rating agency said that it lifted the Central American country's long- and short-term ratings to "B-/B" from "CCC+/C", with a stable outlook. The move follows congressional approval of external debt to cover an $800 million eurobond that is due in December 2019 as part of its fiscal budget. The budget also includes additional financing to meet other debt maturities and interest payments.

"The upgrade also reflects our view that the correction to the general government deficits and the stabilization of El Salvador's debt level over the last two years will continue through 2021," S&P added.

However, the country's "limited monetary flexibility, a weak economy, and a damaged debt payment culture" continue to constrain its credit ratings.

The stable outlook, meanwhile, reflects the expectation that El Salvador will maintain moderate fiscal deficits and stable debt levels, as well as "consistent, albeit moderate, economic growth in next three years."

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news story can be found here.