Business Wire (press release), CA
Fitch Ratings today affirmed El Salvador's foreign and local currency ratings of 'BB+' and revised the Rating Outlook to Stable from Negative. The Outlook revision reflects the government's attempt to reverse the fiscal deterioration observed during 2001-2002, its progress on tax reform, and an improved political environment.
Since August 2002, when the Negative Outlook was assigned, the government has made efforts to consolidate its finances. As a result, the nonfinancial public sector deficit has declined from 4.4% of GDP in 2002 to an estimated 2.4% of GDP in 2004 in spite of sluggish growth. The reduction in the deficit reflects a drop in reconstruction costs, greater tax collection efforts, and reduced current expenditure. Tax performance is likely to improve further as the recently passed fiscal reforms begin to take effect in 2005. As a result, the government debt burden has stabilized at just over 40% of GDP, which is moderate in comparison with El Salvador's rating peers.
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