WASHINGTON: Fitch cut the rating on Argentina’s long-term debt by two notches on Friday, citing increased uncertainty and a rising risk of default.
The agency downgraded the crisis-hit government’s debt rating to “CCC” from “B.”“The downgrade of Argentina’s ratings reflects elevated policy uncertainty following the Aug. 11 primary elections, a severe tightening of financing conditions, and an expected deterioration in the macroeconomic environment that increase the likelihood of a sovereign default or restructuring of some kind,” Fitch said in its announcement, reports AFP.
The government of President Mauricio Macri suffered a crushing political defeat in a vote earlier this month, which Fitch said “increases risks of a break from the policy strategy of the current administration of Mauricio Macri guided by a program with the IMF.”
Opposition leader Alberto Fernandez, now the favorite to unseat Macri in October’s presidential election, has questioned the reform program backed by a $56 billion rescue package from the International Monetary Fund.
The country is currently in a recession and posted 22 percent inflation for the first half of the year — one of the highest rates in the world —but the IMF said Macri’s reform program was beginning to yield results. Buenos Aires has a fraught history with the IMF, and Fitch said “policy credibility and market access could still be severely tested amid weak economic conditions, high public debt and inflation.”