Moody’s Investors Service maintained the long-term foreign currency issuer rating of the Government of Ecuador at Caa3, with a stable outlook.
It should be noted that Caa3 is, within Moody’s scale, the 19th step out of a possible 21, so Ecuadorian debt is among the worst rated in the world.
According to the US firm, the confirmation of Ecuador’s Caa3 rating reflects Moody’s assessment that “the country’s credit profile remains constrained by limited financing options, weak institutions and a difficult socio-political environment,” factors that increase the risk of default.
The firm notes that despite progress under the recently completed US$6.5 billion (5.7% of GDP) International Monetary Fund (IMF) Extended Fund Facility program, Ecuador continues to face “significant credit risks” due to limited access to external financing, low liquidity buffers, and fragile governance.
Meanwhile, the “stable” outlook on the rating reflects Moody’s view that upside and downside risks to Ecuador’s credit profile remain balanced.
“Fiscal performance will benefit from favorable hydrocarbon prices, and debt ratios will continue to trend downward,” Moody’s said.
And it indicated that near-term liquidity risks are moderate, given low public deficits and limited debt refinancing needs following the 2020 restructuring.
However, the report clarified, “Political paralysis will limit the government’s ability to adopt reforms to improve market confidence and regain access to international capital markets in the face of a challenging debt repayment schedule.”
With information from Sputnik