IMF Staff Statement on El Salvador

IMF News, August 6, 2024

Source details

Press Release No. 24/302; August 6, 2024.
An International Monetary Fund (IMF) mission led by Mr. Raphael Espinoza held in person and virtual discussions with the Salvadoran authorities focused on policies that could be supported by an IMF program to address macroeconomic imbalances and strengthen El Salvador’s medium-term growth prospects and resilience.
The Fund team emphasized a close engagement with the Salvadoran authorities “with the objective of reaching agreement on policies that will ensure stability and prosperity for the benefit of all the Salvadoran people.”

Preliminary understandings reached on improving the primary balance by around 3½ percent of GDP over a three-year period to place public debt on a sustainable path.
Consolidation approach described as a “balanced set of measures,” with initial focus on rationalizing the public wage bill while providing space for critical social and infrastructure spending.
Measures aim to reduce the government’s reliance on domestic financing through the planned consolidation and potential support from the Fund and other multilateral development banks.

Progress on developing a plan to gradually strengthen financial system reserve buffers in a manner consistent with continued private sector credit and growth.
Plan supported by efforts to reduce the government’s reliance on domestic financing.

Preliminary understandings on a comprehensive multi-year strategy to enhance governance, transparency, and the overall investment climate.
Authorities are “well advanced in preparing legislative proposals to address corruption, money-laundering vulnerabilities, and weaknesses in the procurement frameworks.”
Work is being supported by development partners and aims to ensure frameworks are consistent with international best practices.

Acknowledgement that “many of the risks have not yet materialized,” but joint recognition that further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks from the Bitcoin project.
Additional discussions on Bitcoin and other key areas remain necessary.

Additional discussions in the identified policy areas are needed before reaching agreement on a Fund-supported program.
The Fund team looks forward to maintaining close engagement with the Salvadoran authorities to reach agreement on policies supporting stability and prosperity.

Press Release No. 24/302 — August 6, 2024 — International Monetary Fund