Fitch Ratings downgraded Argentina's foreign currency debt on Friday by two notches to leave it hovering one level above default.
The debt downgrade from CCC- to C suggests that the ratings agency believes a default is "imminent," and comes shortly after the government decree forcing domestic public sector entities to swap their foreign currency-denominated debt for debt denominated in the domestic currency, the peso.
Fitch said Argentina would be downgraded further still to Restricted Default once the exchanges have been carried out.
In its explanation as to what constitutes a default event it pointed to "a unilateral exchange... initiated by the sovereign on a public debt security" and "a forced redenomination of sovereign debt into a different currency."
Argentina had made the decision to halt the fall in its international reserves, in part due to a scarcity of foreign currency and exchange volatility in the financial sector.
"In a sustained manner, the state will gain the capacity to act in the financial dollar markets, which will make it possible to avoid disruptive increases," Deputy Economy Minister Gabriel Rubinstein had said previously on Twitter.
He said Argentina was looking to "strengthen the macroeconomic order" with this move.
According to the Central Bank, Argentina has brute international reserves of just over US$37.5 billion, but the net figure is considerably lower, analysts say.
In announcing the decree, the government had said it would "stabilise the markets, absorb possible monetary surpluses and keep fighting inflation," which hit just under 95 percent for 2022 and surpassed 100 percent in the 12 months to February.