{
  "title": "Press Release: IMF Approves Stand-By Credit for El Salvador",
  "publication": "IMF News, March 3, 1997",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9711",
  "canonical": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9711",
  "overlayPath": "/en/news/articles/2015/09/14/01/49/pr9711/index.md",
  "summary": "The International Monetary Fund (IMF) approved a 14-month stand-by credit for El Salvador, equivalent to SDR 37.68 million (about US$52 million), to support the government’s 1997 economic program.",
  "publishDate": "1997-03-03",
  "sections": [
    {
      "heading": "Overview",
      "content": "- The International Monetary Fund (IMF) approved a 14-month stand-by credit for El Salvador, equivalent to SDR 37.68 million (about US$52 million), to support the government’s 1997 economic program."
    },
    {
      "heading": "Background",
      "content": "- Since the end of the 12-year long civil war in 1990, and through 1995, economic growth in El Salvador averaged more than 6 percent a year, fostered by the implementation of economic reform and structural policies supported by consecutive IMF stand-by credits.\n- Achievements to date:\n  - Significant progress in reforming the tax system, and the labor market.\n  - Recent progress in privatization.\n  - Implementation of the peace accords in the context of strengthening the fiscal position.\n- Remaining challenges:\n  - Less success in reducing inflation to international levels.\n  - Economic activity decelerated between mid-1995 and mid-1996 due to a burst in private consumption, the end of a construction boom, and adverse external shocks affecting external competitiveness.\n  - Inflation remained high in part because of increases in international prices of cereals and oil.\n  - The colón continued to appreciate in real effective terms, contributing to erosion of external competitiveness.\n- Positive signs in the second half of 1996:\n  - The pace of economic activity picked up.\n  - Inflation decelerated.\n  - External competitiveness improved."
    },
    {
      "heading": "Medium-Term Strategy and the 1997 Program",
      "content": "- Program objectives and quantitative targets for 1997:\n  - Real GDP growth of about 4 percent in 1997.\n  - Reduction of the overall deficit of the nonfinancial public sector to 1.4 percent of GDP.\n  - Decline in inflation to 5-6 percent.\n  - Increase in net international reserves to the equivalent of 5 months of imports.\n- Fiscal policy and public finance measures:\n  - Strengthen public finances while accommodating larger outlays for infrastructure.\n  - Maintain an appropriate monetary policy.\n  - Continue advancing structural reforms.\n  - Contain current expenditure and increase tax collections as part of public sector modernization and improving social expenditure.\n  - New public positions will be offered only in priority sectors such as health and education.\n  - Tax ratio expected to rise from 11.1 percent of GDP in 1996 to 11.8 percent of GDP in 1997, despite a reduction in import duties."
    },
    {
      "heading": "Structural Reforms",
      "content": "- Privatization and sectoral reforms:\n  - Following approval in September 1996 of the necessary legislation:\n    - Sales of 49 percent of the telephone company ANTEL and of the first of four electricity distribution companies are expected to be completed in the first half of 1997.\n    - The other three electricity distribution companies are expected to be sold by year’s end.\n    - Telecommunications system expected to be fully privatized in two years.\n- Public investment and pension reform:\n  - Physical and financial implementation of the public investment program will be prioritized, monitored, and controlled through a unit of administration of public investment under the Ministry of Finance.\n  - Legislation passed in December 1996 to reform the pension system and substitute the current pay-as-you-go system with privately administered individual accounts."
    },
    {
      "heading": "Addressing Social Needs",
      "content": "- Social and military expenditure targets:\n  - Social expenditure increased from 3.5 percent of GDP in 1995 to 4.8 percent in 1996 and will be maintained at that level in 1997.\n  - Military expenditure was contained at 1 percent of GDP in 1996 and will be reduced to 0.9 percent in 1997.\n- Policy emphasis:\n  - Expanding and improving basic health and educational services.\n  - Ensuring public safety to facilitate economic development."
    },
    {
      "heading": "The Challenge Ahead",
      "content": "- Continued priorities:\n  - Further tightening of fiscal policy.\n  - Continuing implementation of structural reforms to increase productivity to lay the basis for recovery of private investment and growth.\n  - Attainment of the inflation objective is fundamental to prevent loss of external competitiveness."
    },
    {
      "heading": "IMF Membership and Quota",
      "content": "- El Salvador joined the IMF on March 14, 1946.\n- Member quota: SDR 125.6 million (about US$174 million).\n- At the time of the release, El Salvador had no outstanding use of IMF credit."
    },
    {
      "heading": "Selected Economic Indicators (as presented)",
      "content": "- Real GDP (Percent change)\n  - 1993: 7.4\n  - 1994: 6.0\n  - 1995: 6.3\n  - 1996: 2.0-2.5\n  - 1997: 3.5-4.0\n- Consumer prices (end of period)\n  - 1993: 12.1\n  - 1994: 8.9\n  - 1995: 11.4\n  - 1996: 5.0-6.0\n- Overall fiscal balance, excluding grants (deficit-)\n  - 1993: -3.6\n  - 1994: -1.9\n  - 1995: -0.9\n  - 1996: -1.8\n  - 1997: -1.4\n- External current account balance, excluding official transfers (deficit-)\n  - 1993: -4.4\n  - 1994: -3.7\n  - 1995: -5.1\n  - 1996: -2.1\n  - 1997: -2.8\n- Gross international reserves (Months of imports)\n  - 1993: 4.2\n  - 1994: 3.9\n  - 1995: 4.9\n  - 1996: 5.1\n\nEstimate.\nProgram.\n\nInternational Monetary Fund — Press Release No. 97/11\n\n---\n\n\n References\n\n- El Salvador and the IMF\n- Press Releases\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr9711"
    }
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    "Published: March 3, 1997",
    "The International Monetary Fund (IMF) approved a 14-month stand-by credit for El Salvador, equivalent to SDR 37.68 million (about US$52 million), to support the government’s 1997 economic program.",
    "Since the end of the 12-year long civil war in 1990, and through 1995, economic growth in El Salvador averaged more than 6 percent a year, fostered by the implementation of economic reform and structural policies supported by consecutive IMF stand-by credits.",
    "Achievements to date:",
    "Remaining challenges:",
    "Positive signs in the second half of 1996:",
    "Program objectives and quantitative targets for 1997:",
    "Fiscal policy and public finance measures:",
    "Privatization and sectoral reforms:",
    "Public investment and pension reform:",
    "Social and military expenditure targets:",
    "Policy emphasis:",
    "Continued priorities:",
    "El Salvador joined the IMF on March 14, 1946.",
    "Member quota: SDR 125.6 million (about US$174 million).",
    "At the time of the release, El Salvador had no outstanding use of IMF credit.",
    "Real GDP (Percent change)",
    "Consumer prices (end of period)",
    "Overall fiscal balance, excluding grants (deficit-)",
    "External current account balance, excluding official transfers (deficit-)",
    "Gross international reserves (Months of imports)",
    "[El Salvador and the IMF](http://www.imf.org/external/country/SLV/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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