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Fitch upgrades El Salvador after pension debt exchange

Fitch Ratings raised El Salvador's long-term local-currency issuer default rating to B- from RD after a domestic debt exchange of pension investment certificates and the passage of pension reform.

The ratings agency also upgraded the country's long-term foreign-currency rating to B- from CCC with a stable outlook and the short-term local- and foreign-currency ratings to B from C.

Following a default on payments on pension certificates, Fitch had downgraded the country's long-term local-currency issuer default rating to RD from CCC. The subsequent successful restructuring and the recent passage of pension reform, with the support of the major opposition Arena party, allowed Fitch to upgrade long-term local- and foreign-currency issuer default ratings.

The rating agency said the restructuring and the recent congressional authorization of external debt issuance for $170 million should help the government close its remaining financing gap for the year.

The de-escalation of political tensions between the ruling FMLN party and the main opposition should also allow for the passage of the 2018 budget as well the authorization of external debt issuance that will help the government meet its financing needs through the end of 2018, Fitch said.