Wednesday 12 May 2021

S&P maintains Costa Rica’s rating but warns of a possible downgrade if loan with the IMF fails

Standard and Poor’s (S&P) explained that the negative outlook indicates the possibility that the rating will be lowered in the next six to 12 months if Costa Rica does not advance in its strategy of corrective fiscal actions.

QCOSTARICA – The risk rating agency Standard and Poor’s (S&P) confirmed Wednesday, March 25, its long-term sovereign ratings in local and foreign currency of ‘B’ for Costa Rica, but made it clear that it could lower it if the country does not take corrective fiscal actions.

Specifically, the agency referred to measures such as the approval of loan with the International Monetary Fund (IMF) or the public employment law.

S&P also kept the country’s debt in a “negative outlook,” indicating that the rating could be downgraded in the future.

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“The negative outlook indicates the possibility that we will lower the rating in the next six to 12 months if Costa Rica does not advance in its strategy of corrective fiscal actions, such as those of the proposed EFF (extended facility credit with the IMF) or the legislation of public employment, which would strengthen its financial indicators after the pandemic, or if there are setbacks in the best funding conditions in the local market that have been observed so far in 2021,” the agency indicated.

Earlier this month, Fitch Ratings made a similar decision, by keeping Costa Rica’s risk rating unchanged, but reiterated its concern about the political uncertainty that threatens the approval and support of the agreements reached by the Government with the International Monetary Fund (IMF).

 

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