Moody’s Lowers Bolivia’s Credit Rating to Caa3, Warning of Financial Risks and Lack of Foreign Currency

The Moody’s group lowered Bolivia’s credit rating to Caa3 due to the lack of foreign currency, warning of risks regarding the fulfillment of its financial obligations.

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The Moody’s group has announced a downgrade in Bolivia’s credit rating, going from Caa1 to Caa3. In addition, he has warned of the possibility that the country will not meet its foreign debt and import obligations due to the lack of foreign currency.

The rating outlook has been revised from negative to stable, as both the downside and upside risks to Bolivia’s credit profile remain balanced. This is due to the money expected in terms of multilateral loans and recent government measures to curb exports and support private sector growth, among other things.

Concern about reserves and the hydrocarbon sector

Moody’s indicates that the approval of the Gold Law has provided temporary relief in 2023, but reserves continue to decrease and the legal limit for gold sales by the Central Bank of Bolivia (BCB) is close to its be reached.

In addition, Bolivia is expected to maintain very low levels of foreign exchange reserves, increased production in the hydrocarbon sector and high internal political risk, which will affect the governance of the country.

Internal conflicts and problems with agreeing beliefs

The internal struggle within the Movement towards Socialism (MAS) is particularly identified as the main reason why the beliefs are not agreed in Congress. Although some of them have been approved with controversy in the Chamber of Deputies, they have been stalled in the Senate for weeks.

“The loans provide necessary financing for Bolivia’s current account deficit in the short term, but they do not address long-term external financing needs. Although principal payments on Bolivia’s two international sovereign bonds do not mature until 2026, continued external liquidity pressures have increased sovereign credit risks,” Moody’s statement concluded.

Moody’s is a risk rating agency that conducts international financial research and analyzes commercial and government organizations.