Washington, Aug 16 (AFP/APP):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.
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.”
Argentina defaulted on its debt in 2001 during the worst economic crisis in its history, and it took years before it could restore its credibility in world financial markets.