Ratings agency S&P has downgraded El Salvador’s sovereign credit rating to “selective default” after the government missed payments related to its pension debts.

The government missed $28.8m worth of payments due between April 7 and April 10 after the country’s Congress failed to approve a budgetary allocation to cover the payments. Assuming a solution is not found, the total owed is set to rise to $55.2m by the end of this month.

An SD rating means S&P believes the state has chosen to default on a specific issue, but “will continue to meet its payment obligations on other issues or classes of obligations”.

S&P said “the ability of the government and opposition parties to reach agreement on fiscal policy and improve the sovereign’s access to liquidity will be key to the future credit rating” when the immediate issue of default is solved.

The government already had a rating of CCC- with S&P, reflecting what the agency described as its “long-standing monetary and fiscal rigidities, poor growth prospects, and the political polarisation that contributed to the recent missed debt payments”.

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