{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with El Salvador",
  "publication": "IMF News, January 25, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/01/25/pr2213-el-salvador-imf-executive-board-concludes-2021-article-iv-consultation",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) on January 24, concluded the Article IV consultation with El Salvador.",
  "publishDate": "2022-01-25",
  "sections": [
    {
      "heading": "Consultation summary and context",
      "content": "- The Executive Board of the International Monetary Fund (IMF) on January 24, concluded the Article IV consultation with El Salvador.\n- The pandemic interrupted ten years of growth, followed by a rapid rebound supported by:\n  - Robust external demand.\n  - Resilient remittances.\n  - A disbursement under the Rapid Financing Instrument (SDR287.2 million or US$389 million) approved in April 2020.\n- Real GDP outcomes and projections:\n  - The economy contracted by 7.9 percent in 2020.\n  - Projected to grow by about 10 percent in 2021.\n  - Projected to grow by 3.2 percent in 2022."
    },
    {
      "heading": "Economic outlook and external sector",
      "content": "- Key macro projections and indicators (selected):\n  - Real GDP growth (percent): 2016: 2.5; 2017: 2.2; 2018: 2.4; 2019: 2.6; 2020: -7.9; 2021: 10.0; 2022: 3.2.\n  - Consumer price inflation (average, percent): 2016: 0.6; 2017: 1.0; 2018: 1.1; 2019: 0.1; 2020: -0.4; 2021: 3.5; 2022: 2.8.\n  - Terms of trade, percent change: 2016: 6.1; 2017: -4.3; 2018: -3.9; 2019: 0.8; 2020: 6.0; 2021: -5.4; 2022: 3.4.\n  - External sovereign bond spread (basis points): 2016: 599; 2017: 520; 2018: 424; 2019: 453; 2020: 760; 2021: 837.\n  - Current account balance (percent of GDP): 2016: -2.3; 2017: -1.9; 2018: -3.3; 2019: -0.6; 2020: 0.5; 2021: -2.5.\n  - Trade balance (percent of GDP): 2016: -19.2; 2017: -19.4; 2018: -21.7; 2019: -21.2; 2020: -21.1; 2021: -28.7; 2022: -28.4.\n  - Transfers (net, percent of GDP): 2016: 18.8; 2017: 20.2; 2018: 20.6; 2019: 21.0; 2020: 24.2; 2021: 26.1; 2022: 26.5.\n  - Gross international reserves (mill. U.S. dollars): 2016: 3,238; 2017: 3,567; 2018: 3,569; 2019: 4,446; 2020: 3,083; 2021: 3,510; 2022: 3,980.\n  - Nominal GDP (billions of U.S. dollars): 2016: 25.0; 2017: 26.0; 2018: 26.9; 2019: 24.6; 2020: 27.9; 2021: 29.4."
    },
    {
      "heading": "Fiscal vulnerabilities, debt, and public finances",
      "content": "- Fiscal outcomes and projections (percent of GDP unless otherwise indicated):\n  - The fiscal deficit is projected at 5¾ percent of GDP in 2021 and about 5 percent of GDP in 2022.\n  - Under current policies, public debt is expected to rise to about 96 percent of GDP in 2026 on an unsustainable path.\n- Selected fiscal indicators from Table 1:\n  - Overall balance (percent of GDP): 2016: -3.1; 2017: -2.7; 2018: -8.2; 2019: -5.8; 2020: -4.9; 2021: -4.9 (table shows -4.9 for 2021 in earlier text and -4.9 in table—retain table values).\n  - Primary balance (percent of GDP): 2016: -0.2; 2017: 0.7; 2018: 0.9; 2019: -3.8; 2020: -1.1; 2021: 0.0.\n  - Of which: tax revenue (percent of GDP): 2016: 17.2; 2017: 17.6; 2018: 18.0; 2019: 17.7; 2020: 18.5; 2021: 20.4; 2022: 20.9.\n  - Public sector debt 1/ (percent of GDP): 2016: 68.8; 2017: 70.5; 2018: 70.4; 2019: 71.3; 2020: 89.2; 2021: 84.4; 2022: 84.8.\n- Observations and policy emphasis:\n  - Persistent fiscal deficits and high debt service are leading to large and increasing financing needs.\n  - Directors cautioned that fiscal vulnerabilities have grown during the pandemic and need prompt action.\n  - Directors generally agreed on the need to implement a fiscal consolidation starting this year based on high-quality revenue and spending measures to restore fiscal sustainability and put public debt on a firm downward trajectory.\n  - Directors welcomed steps to modernize public financial management and assess fiscal risks.\n  - Directors urged further strengthening of fiscal transparency, accountability, anti-corruption, and AML/CFT frameworks, and recommended upgrading the statistical framework."
    },
    {
      "heading": "Financial sector, supervision, and inclusion",
      "content": "- Banking and financial stability issues:\n  - With the unwinding of exceptional measures introduced to support liquidity and provide debt relief to households and companies, Directors stressed the need to monitor banks’ recovery strategies.\n  - Directors welcomed plans to introduce a banking crisis resolution framework.\n  - Positive note taken on the decision to transition toward a forward-looking and risk-based financial supervision.\n- Financial inclusion and digital payments:\n  - Directors agreed on the importance of boosting financial inclusion and noted that digital means of payment—such as the Chivo e-wallet—could play this role.\n  - However, Directors emphasized the need for strict regulation and oversight of the new ecosystem of Chivo and Bitcoin."
    },
    {
      "heading": "Bitcoin adoption: risks and recommendations",
      "content": "- Policy action taken:\n  - Since September 2021, the government has adopted Bitcoin as legal tender.\n- Risks identified:\n  - The adoption of a cryptocurrency as legal tender entails large risks for financial and market integrity, financial stability, and consumer protection.\n  - It also can create contingent liabilities.\n  - Directors emphasized large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities.\n  - Some Directors expressed concern over the risks associated with issuing Bitcoin-backed bonds.\n- Recommendations:\n  - Directors urged the authorities to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status.\n  - Directors emphasized the need for strict regulation and oversight of the Chivo/Bitcoin ecosystem."
    },
    {
      "heading": "Governance, transparency, and structural reforms",
      "content": "- Directors commended the authorities for timely and effective pandemic management, contributing to low COVID-19 infection and mortality rates in the region.\n- Structural reforms and priorities highlighted by Directors:\n  - Implement structural fiscal reforms to address high and rising financing needs.\n  - Boost inclusive growth through reforms to reduce crime, cut red tape, reduce energy costs, and increase infrastructure and social spending, including on education and health.\n  - Strengthen anti-corruption and AML/CFT frameworks in line with international standards.\n  - Strengthen fiscal transparency and accountability; Directors welcomed publication of reports on the use of public funds for COVID-19 and audits of the Court of Accounts.\n  - Upgrade the statistical framework."
    },
    {
      "heading": "Key social and structural indicators (from Table 1)",
      "content": "- Per capita income (U.S. dollars, 2020): 3,799.\n- Population (million, 2020): 6.3.\n- Percent of pop. below poverty line (2020): 26.\n- Gini index (2019): 35.\n- Credit to the private sector (percent of GDP): 2016: 51.2; 2017: 52.2; 2018: 53.5; 2019: 55.3; 2020: 62.1; 2021: 57.6; 2022: 56.3.\n- Broad money (percent of GDP): 2016: 50.0; 2017: 53.8; 2018: 54.8; 2019: 59.0; 2020: 70.2; 2021: 65.7; 2022: 65.1.\n- Interest rate (time deposits, percent): 2016: 4.4; 2017: 4.2; 2018: 4.3; 2019: 4.1; 2020: 3.9.\n- Foreign direct investment (percent of GDP): 2016: -1.4; 2017: -3.6; 2018: -3.2; 2019: -2.4; 2020: -0.8; 2021: -2.8.\n- Net Foreign Assets of the Financial System (Millions U.S. dollars): 2016: 1,995; 2017: 2,645; 2018: 2,714; 2019: 3,424; 2020: 3,046; 2021: 3,303; 2022: 3,836.\n- National savings and investment (percent of GDP): Gross domestic investment: 2016: 16.0; 2017: 16.7; 2018: 18.4; 2019: 16.9; 2020: 17.9; 2021: (not shown for 2021 in table cells beyond 2020); Private sector 2/ (percent of GDP): 2016: 13.5; 2017: 14.1; 2018: 15.7; 2019: 14.2; 2020: 15.8; 2021: 14.5; National savings: 2016: 13.7; 2017: 14.8; 2018: 15.1; 2019: 16.3; 2020: 15.2; Private sector (percent of GDP): 2016: 14.7; 2017: 16.4; 2018: 24.0; 2019: 17.3.\n\nIMF Executive Board press release, January 25, 2022.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- El Salvador and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/01/25/pr2213-el-salvador-imf-executive-board-concludes-2021-article-iv-consultation"
    }
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    "Published: January 25, 2022",
    "The Executive Board of the International Monetary Fund (IMF) on January 24, concluded the Article IV consultation with El Salvador.",
    "The pandemic interrupted ten years of growth, followed by a rapid rebound supported by:",
    "Real GDP outcomes and projections:",
    "Key macro projections and indicators (selected):",
    "Fiscal outcomes and projections (percent of GDP unless otherwise indicated):",
    "Selected fiscal indicators from Table 1:",
    "Observations and policy emphasis:",
    "Banking and financial stability issues:",
    "Financial inclusion and digital payments:",
    "Policy action taken:",
    "Risks identified:",
    "Recommendations:",
    "Directors commended the authorities for timely and effective pandemic management, contributing to low COVID-19 infection and mortality rates in the region.",
    "Structural reforms and priorities highlighted by Directors:",
    "Per capita income (U.S. dollars, 2020): 3,799.",
    "Population (million, 2020): 6.3.",
    "Percent of pop. below poverty line (2020): 26.",
    "Gini index (2019): 35.",
    "Credit to the private sector (percent of GDP): 2016: 51.2; 2017: 52.2; 2018: 53.5; 2019: 55.3; 2020: 62.1; 2021: 57.6; 2022: 56.3.",
    "Broad money (percent of GDP): 2016: 50.0; 2017: 53.8; 2018: 54.8; 2019: 59.0; 2020: 70.2; 2021: 65.7; 2022: 65.1.",
    "Interest rate (time deposits, percent): 2016: 4.4; 2017: 4.2; 2018: 4.3; 2019: 4.1; 2020: 3.9.",
    "Foreign direct investment (percent of GDP): 2016: -1.4; 2017: -3.6; 2018: -3.2; 2019: -2.4; 2020: -0.8; 2021: -2.8.",
    "Net Foreign Assets of the Financial System (Millions U.S. dollars): 2016: 1,995; 2017: 2,645; 2018: 2,714; 2019: 3,424; 2020: 3,046; 2021: 3,303; 2022: 3,836.",
    "National savings and investment (percent of GDP): Gross domestic investment: 2016: 16.0; 2017: 16.7; 2018: 18.4; 2019: 16.9; 2020: 17.9; 2021: (not shown for 2021 in table cells beyond 2020); Private sector 2/ (percent of GDP): 2016: 13.5; 2017: 14.1; 2018: 15.7; 2019: 14.2; 2020: 15.8; 2021: 14.5; National savings: 2016: 13.7; 2017: 14.8; 2018: 15.1; 2019: 16.3; 2020: 15.2; Private sector (percent of GDP): 2016: 14.7; 2017: 16.4; 2018: 24.0; 2019: 17.3.",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[El Salvador and the IMF](http://www.imf.org/external/country/SLV/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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