A government led by Guatemalan presidential favorite Bernardo Arévalo would target an investment grade credit rating for the low-debt country, a top economic advisor said.
(Bloomberg) — A government led by Guatemalan presidential favorite Bernardo Arévalo would target an investment grade credit rating for the low-debt country, a top economic advisor said.
Economist and congressman-elect Jonathan Menkos, who helped write the campaign’s economic plan, said the country could be upgraded from junk within two years by improving rule of law and cracking down on graft to boost the country’s governability score.
S&P Global Ratings and Fitch Ratings both upgraded the country to BB, this year, two notches below investment grade. S&P itself said that strengthening the country’s regulatory and legal framework, “could result in an upgrade”.
Arévalo leads voter intentions ahead of an August 20 presidential runoff and presented a plan last week to fight graft, including increased oversight of government spending. A poll by Cid Gallup showed corruption as a top concern for voters.
Read more: Guatemala Election Body Says Government is Undermining Vote
“We are relatively close, so it’s not too crazy to think we can achieve it,” Menkos said, adding that the government would seek to refinance its debt at cheaper rates with longer maturities if it earns an upgrade.
Years of prudent fiscal policy give Guatemala space to spend to improve social and infrastructure indicators that have held down the country’s rating, Menkos said. If elected, they would double public investment spending to 1% of gross domestic product to build roads, ports and airports while improving education and job training, he said.
The nation’s debt will fall to 28% of gross domestic product this year, among the lowest in the Americas, according to a forecast by the International Monetary Fund.
Additional spending would be financed by a mix of local and foreign debt sales and multilateral loans, Menkos said. If fully executed, the government’s fiscal deficit would widen to 2.9% of gross domestic product by 2025 from about 2% now. The campaign has promised no new taxes over the next four years and said it will instead focus on fighting evasion.
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