Most of these countries are mired in poverty, and have had to resort to financial rescue or humanitarian aid.
All countries resort to external loans when they have to start social programs, build public infrastructure or face natural disasters and when they do, they are subject to an assessment of their ability to repay. This capacity is dictated by the risk rating agency which, on many occasions, is employed by the governments themselves to support them when applying for a loan.
There are countries like Australia Those who have been disciplined in their public finances and have a Class AAA For being excellent in repaying its debts to its creditors on time. Investors’ confidence in this type of country is very high as the agencies have fully backed their credit history.
Like Australia, there are other countries with good credit rating like Belgium, Canada, Denmark and Finlandwho have an excellent grade and lend them money because there is confidence in their finances.
Standard & Poor’s downgrades El Salvador’s credit rating to CCC+. How does this affect?
But there are other countries that do not have the support of agencies and, on the contrary, fall among the lowest-ranked countries because their financial resources are weak, have defaulted on their commitments or have reached the point of asking for a bailout. Finance, which puts it on the red list of rating agencies.
In that red list countries like Mozambique, Republic of the Congo, Zambia and Lebanon. on Wednesday of this week, El Salvador has joined these countries On a bad note, due to the increasing distrust of paying investors in the country.
Standard and Poor’s rating agency lowered El Salvador’s credit rating to CCC+, a note similar to that of the above countries.
In Latin America, the country that really got such a bad score was Argentina, given that it stumbled in 2001 and then had to resort to financial bailouts.
Moody’s Warns That Bitcoin Operations Increases El Salvador’s Sovereign Risks
Other credit agencies such as Fitch Ratings and Moody’s have downgraded El Salvador to the degree of speculative or at high risk of defaulting on its debt.
His next debt payment is $800 million in January 2023 and so far he doesn’t have a source of funding to tap into this spending, so doubts about whether he’ll pay that amount are growing.
The countries that have already received this credit rating are those with a high poverty rate, which have serious institutional problems or that have already lagged or resorted to financial bailouts.
Ukraine, which has been devastated by the Russian invasion since February of this year, is also slipping into the worst credit rating because it now does not have the ability to generate income and deal with its creditors.