Morgan Stanley sees a positive outlook for El Salvador bonds

The international financial institution, Morgan Stanley, indicated that El Salvador could pay its debt commitments in the short term, including the 2023 bonds. The American banking giant estimated that El Salvador would not have problems with the payment of its debt for another year.

“The country could get by without defaulting for at least another year,” wrote Simon Waever, global head of emerging markets sovereign credit strategy at Morgan Stanley.

The analyst of the financial multinational assures that El Salvador has a primary surplus and has shorter maturities than other countries in difficulties such as Argentina, Egypt, and Ukraine, and he concludes that El Salvador should not have problems paying the debt in the next 12 months.

The government’s $7.7 billion in Eurobonds has been “too punished” by the market even though El Salvador has better metrics than other distressed pairs, Simon Waever, global head of emerging market sovereign credit strategy at the bank, wrote in an email on Tuesday.

In this regard, the Minister of Finance, Alejandro Zelaya, explained that the report points out substantive issues about the market’s perception of the Salvadoran economy, which the government has pointed out and reiterated through different means and emphasizes: “El Salvador seems to have been excessively punished by the market» compared to other countries.

“Some of our reiterated affirmations, which coincide with those of this report, support the direction of the economic and fiscal policies of this government, for various reasons,” said the official, citing among the main ones the fact that El Salvador has credible payment methods thanks to its good relationship with multilateral organizations, in addition to alternative sources of funds, which are within the rules of the stock market and the multilateral organizations themselves.

He went on to say that economic growth and increased tax collection are critical to the credibility of the government’s commitments.

“There is a strong commitment from the authorities, headed by President Nayib Bukele, to the fulfillment of their commitments, both with the population and with investors and multilateral organizations,” he stressed.

Last week, Zelaya reiterated that the Salvadoran government does not propose a scenario of non-payment of fiscal commitments and assured that it has the capacity and the will to comply with them.

“We are not going to stop paying our obligations. We will fully comply with each of them. We have complied even in times of crisis with COVID-19, when our tax revenues fell enormously and we still came out with all the commitments. And now we will continue to comply,” said Minister Zelaya.

In addition, he stressed that for the moment they do not consider seeking credits in the international market since fiscal revenues and multilateral financing will be sufficient to meet the country’s obligations.

“We have presented all our tax scenarios, and I think everyone is aware of our ability to pay. We are going to fulfill all our commitments », he concluded.