(Bloomberg) -- Argentina’s credit score was slashed by Fitch Ratings to the lowest above default as the government plans to force state-owned institutions to unload their holdings of dollar bonds.

The nation was downgraded by two notches to C from CCC- by Fitch, according to a Friday statement. The debt swap, announced in an official government decree on Thursday, would involve unilateral exchanges and forced currency conversions that qualify as a default under Fitch’s criteria. 

“The ‘C’ rating reflects Fitch’s view that default is thus imminent,” wrote Fitch analysts led by Todd Martinez. The rating assessor said Argentina’s score would be cut to restrictive default when the exchange occurs.

In the swap, state-run banks and the public pension fund Anses stand to exchange 100% of their holdings of overseas bonds under New York law for peso-denominated debt. It’s a move that aims to preserve the central bank’s dwindling cash reserves and ease pressure on the official exchange.

“It is a difficult situation situation indeed,” said William Snead, an analyst at BBVA in New York. “The government is reaching to any available means to gain access to US dollars.”

Argentina’s central bank is running low on net cash reserves, down to an estimated $1.3 billion, according to consulting firm FMyA. Earlier this week, the Economy Ministry released data showing a fiscal deficit in February equal to about $1.1 billion, noting the impact of a crop drought on tax revenues.

The nation is also slated to hold elections later this year, raising the stakes for economic policy shifts, BBVA’s Snead said.  

The government owes roughly $65 billion to external bondholders of debt restructured in 2020. Argentina’s dollar notes due in 2030 tumbled almost 2 cents this week to 26 cents, according to indicative pricing data collected by Bloomberg. 

Moody’s Investors Service rates the nation as Caa3, the third-lowest score with a stable outlook. S&P Global Ratings scores the country two levels higher with a negative outlook.

(Updates with analyst comment from fifth paragraph. Adds context, bond pricing throughout.)

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