Moody’s Says El Salvador Debt Stays High

EL SALVADOR · ECONOMY · CREDIT RATING

Credit-rating agency Moody’s says El Salvador’s pension deal with the IMF lowers the risk of a cash crunch in 2027, but it still expects the country’s debt to pass 90% of its output that year.

Moody’s Ratings says El Salvador’s deal with the International Monetary Fund (IMF) over its pension debt will sharply reduce the risk of a cash crunch in 2027, but public debt will still pass 90% of economic output that year. The comment, published during the week of 19 October according to Bloomberg Línea’s report of Friday 23 October, matters to US investors because Moody’s rates El Salvador at B3, below investment grade, with a positive outlook.

The obligation at the centre is about US$2.3 billion, equal to 5.5% of the economy by Moody’s count, in unpaid interest and transfers that the state owes private pension fund managers. As that account describes the IMF’s framework, most of it could be turned into new long-term pension certificates, with regular payments starting at the end of 2027.

What Moody’s Said

Moody’s says the IMF agreement “will substantially reduce the risk” that the pension obligation becomes “a disruptive liquidity event” in 2027, in a Spanish-language account translated here. It calls the progress positive for credit because it lets the IMF programme continue and reduces uncertainty over that liability.

The agency adds that the relief does not replace strict fiscal policy, and that the country must keep running budget surpluses before interest payments. It also says financing conditions have improved, liquidity buffers have strengthened and bond spreads have fallen from the distress of 2022.

Moody’s notes that the IMF already counted the operation in its baseline projections. About 30 percentage points of the debt-to-output ratio are tied to long-term pension obligations, the report says.

What the IMF Numbers Show

The IMF’s press release of Thursday 1 October puts gross debt of the non-financial public sector, including pension bonds, at 87.6% of output in 2025, 85.0% in 2026 and 89.2% in 2027. A note says the 2027 figures include the recognition of about US$2.3 billion in accrued but unpaid interest owed to private pension funds.

The IMF’s note says the 2027 figures include that recognition, which would explain a deficit that jumps while the surplus before interest keeps rising. Moody’s expects debt above 90% that year, against the IMF’s 89.2%, and ContraPunto reported on Monday 7 September that Moody’s puts 2026 debt at 93.4%, against the IMF’s 85.0%, a difference the sources do not explain.

The IMF Board completed the second and third reviews of the programme on Thursday 1 October and released about US$138 million (SDR 101.96 million, the IMF’s own unit of account). It urged “timely pension and civil service reforms” and sustained fiscal consolidation to put public debt on a downward trajectory.

How the Pension Debt Built Up

Central Reserve Bank data published on Thursday 30 April show the state owed private pension funds about US$11.48 billion in March 2026, up from about US$11.24 billion in December 2025, Infobae reported. About US$8.39 billion of that sits in transition certificates that have paid no principal or interest since a reform approved by the Legislative Assembly in late 2022.

The US$2.3 billion at the centre of the Moody’s comment is the unpaid interest and transfers that built up during the grace period set by that reform, Bloomberg Línea says, not the full stock of debt to the funds. The same account says the grace period suspended payments of principal and interest on a large part of the debt until April 2027, while interest keeps accumulating.

Earlier IMF documents called for a pension reform proposal by Tuesday 10 February 2026, a deadline the government missed, Infobae reported. The staff-level update of Thursday 3 September now expects a reform of the system’s parameters in 2027, elsalvador.com reports, without saying what the changes will be.

What It Means for You

For US bond investors, Moody’s view is that a liability once seen as a possible cash shock has become easier to manage, while the debt ratio is still set to rise in 2027. At B3, the country remains below investment grade.

The reports describe a Moody’s comment on the pension deal, not a change to the B3 grade or to the positive outlook, which Moody’s raised from stable in early February, according to Diario La Página. A positive outlook means the next move could be an upgrade, but the sources reviewed give no date for any rating decision.

For anyone following the IMF programme in Washington, the Board release says the transfer of majority control of the Chivo bitcoin wallet to a private operator is complete. It adds that “no further Bitcoin accumulation is envisaged beyond the documented donations.”

For Salvadoran workers, the pension reform expected in 2027 is the open question, since the IMF statement does not say what it will contain. Nothing in the sources reviewed says what it will mean for retirement ages or payments.

What Is Not Known

The Rio Times could not open Moody’s own text, so it relies on the Bloomberg Línea report and on elsalvador.com’s repeat of it on Saturday 24 October. The terms of the new pension certificates, including interest rate, maturity and who would hold them, are not public in the sources reviewed.

The Finance Ministry’s news page listed no statement on the Moody’s comment or on the pension operation when the Rio Times looked on Sunday 25 October. It is also unknown when Moody’s might act on its positive outlook, and what the 2027 pension reform will contain.

Frequently Asked Questions

What did Moody’s say about El Salvador’s pension deal?

Moody’s says the pension agreement with the IMF will substantially reduce the risk that the obligation becomes a liquidity shock in 2027. It still expects public debt to exceed 90% of output that year.

How big is the pension obligation?

The IMF puts the accrued but unpaid interest owed to private pension funds at about US$2.3 billion. Moody’s puts that at about 5.5% of El Salvador’s economic output.

What is El Salvador’s credit rating?

Moody’s rates El Salvador B3 with a positive outlook, according to reports of its comment. B3 is below investment grade.

Is El Salvador’s debt now under control?

Not yet. The IMF projects gross public debt at 89.2% of output in 2027, up from 85.0% in 2026, and Moody’s expects more than 90%.

What happens next with pensions?

The IMF expects a reform of the pension system’s rules in 2027, but its content has not been published. The terms of the new pension certificates are also not public.

Sources: IMF, Executive Board completes Second and Third Reviews for El Salvador, 1 October 2026, Bloomberg Línea, Moody’s on the IMF pension agreement, 23 October 2026, elsalvador.com, 24 October 2026, elsalvador.com, IMF staff-level update of 3 September 2026, Diario La Página, Moody’s outlook raised to positive, 7 February 2026, ContraPunto, 7 September 2026, Infobae, Central Reserve Bank pension-debt data, 30 April 2026, Ministerio de Hacienda de El Salvador, news page, viewed 25 October 2026. All opened on 25 October 2026. Moody’s own text was not available to The Rio Times. Quotes from Spanish-language sources are translated by The Rio Times; IMF figures are the Fund’s own projections.

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error · Editorial responsibility: Matthias Camenzind, Editor-in-Chief

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