Fitch Downgrades El Salvador’s Rating Due To BTC Adoption Risks

The American credit rating agency Fitch downgrades El Salvador’s rating because of its BTC Adoption risks and it got its long-term foreign-currency issuer Default Rating to CCC from B- as we can see further in our today’s latest bitcoin news.

Fitch cited policy unpredictability stemming out of the increased concentration of power in teh presidency and weakened institutions as well as legalization and adoption of BTC as the main reason for lowering the grades. As per the official post, the enhanced financing risks arising from growing dependency on short-term debt reflects the Fitch move to downgrade El Salvador’s rating.

It also pointed out the limited scope of the country’s domestic market financing as well as uncertain access to the multilateral funding and external market financing considering high borrowing costs and the increased concerns with respect to the debt sustainability because of the increase in GDP next year after the slight improvements in 2021 which is also another factor. It stated:

“In Fitch’s view, weakening of institutions and concentration of power in the presidency has increased policy unpredictability, and the adoption of bitcoin as legal tender has added uncertainty about the potential for an IMF program that would unlock financing for 2022-2023.”

Fitch stated that El Salvador continues to face risks caused by high financing needs in 2022 as well as in 2023 and it further estimated that the Central American Country’s financing needs will hit a record of $4.85 billion in 2022 which means a 16% increase in GDP. Another 18% rise in GDP to $5.4 billion is also expected and in terms of financing options in the market, the rating company noted that the domestic private pension funds restricted the appetite for the growing exposure to these instruments.

It also observed uncertainty around external financing options like multilateral funding as well doubts over the IMF program in addition to the El Salvador capacity to issue the BTC-backed bonds. El Salvador’s finance minister Alejandro Zelaya also announced plans to issue BTC bonds between March 15 and 20 and he also confirmed that the government will issue $1 billion for the first bond. The crypto peer-to-peer platform Paxful launched a BTC education center in the country with an objective behind the creation of a new center dubbed “LA Casa Del Bitcoin” in order to foster awareness around the benefits of purchasing and selling BTC as means of exchange for the people in El Salvadoreans.

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• Source: https://www.dcforecasts.com/bitcoin-news/fitch-downgrades-el-salvadors-rating-due-to-btc-adoption-risks/