Nicaragua: Risk Rating Continues So Far

Standard & Poor's warned that if in the coming months the political environment worsens or access to local and external financing deteriorates again, the debt note could suffer further deterioration.

Tuesday, November 12, 2019

In November 2018, the agency reduced from B to B the rating of Nicaragua's foreign currency debt with a negative outlook, arguing that the country's fiscal and financial profiles have weakened at that time.

After a year ago it was decided to downgrade the rating, on November 8, 2019 Standard & Poor's reported that they reviewed Nicaragua's economic outlook and this went from negative to stable, but threats remain for a downgrade in the rating.

The report explains that "... The stable outlook balances the recent stabilization of liquidity and continued access to internal and external financing for the government with lasting political uncertainty, severe economic contraction and weaknesses in the financial sector. We expect the government to implement additional adjustments to monetary and fiscal policy, if necessary, to avoid further erosion of liquidity in the financial system and possible loss of foreign exchange reserves.

We could downgrade in the next 12 to 24 months if Nicaragua's access to domestic and foreign financing deteriorates again, or if worsening political dynamics exert greater pressure on the exchange rate, undermining domestic confidence and damaging the domestic financial system.
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See full report (in Spanish).

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