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El Salvador’s long-term rating was upgraded to B- from CCC and its short-term sovereign ratings to B from C, by S&P. The upgrade stems from the local debt reprofiling program started by the government in October, which is expected to reduce rollover needs and mitigate the risk of default over the next 2 years. The program targets refinancing of ~$1.4bn in short-term bills. Under the reprofiling, the government will repay all its outstanding short-term bills at their current maturity dates and issue new debt obligations that could be taken by the same bank. To compensate for the longer maturities, the government will pay higher interest rates ranging from 8.25% for the current one-year bills to 9.75% for the seven-year issuance. Once the program is completed, rollover needs on the short-term debt are expected to ease around $1.7bn- $2bn annually, from the current $2.8bn. However, despite the positive measures, the country still faces considerable fiscal and debt risks as debt service payments remain high and financing alternatives are somewhat limited.
El Salvador’s dollar bonds traded stable with its 6.375% 2027s trading at 85.5 cents on the dollar, yielding 12%