Fitch cut the country to CCC from B- after reserves dipped by US$2.1bil last year to just US$1.7bil. — Bloomberg
LA PAZ: Bolivia was downgraded further into junk territory by Fitch Ratings, which says falling international reserves threaten the nation’s ability to service its debt.
Fitch cut the country to CCC from B- on Tuesday, after reserves dipped by US$2.1bil last year to just US$1.7bil, most of which is held in gold, the ratings company said.
The landlocked South American nation has struggled to prop up its currency, the boliviano, which is pegged at a rate close to seven per US dollar.
“A significant decline in usable international reserves to very low levels” poses risks to macroeconomic stability and debt service capacity, Fitch said in a statement.
Fitch does not assign an outlook to CCC rated borrowers, a group that currently also includes Pakistan.
Fitch expects the government to prioritise external debt payments through 2025.
Bolivia owes US$110mil a year in coupon payments on global bonds maturing in 2028 and 2030.
However, it will face a US$333mil installment in 2026, “which could pose a much greater challenge”, Fitch said.
The note due in 2028, which is thinly traded, has risen about eight US cents this year to around 56 US cents on the dollar, according to indicative pricing compiled by Bloomberg.
Seaport Global on recommended selling Bolivia bonds, citing the reserves squeeze.
“Central Bank funding of the financial deficit, combined with a fixed exchange rate, is resulting in a depletion of international reserves that has now reached critical levels,” Ricardo Penfold, Seaport’s managing director, wrote in a note to clients. — Bloomberg
