Press Release No. 11/352

Press Release: IMF Completes Third Review of El Salvador’s Stand-By Arrangement

September 30, 2011

The Executive Board of the International Monetary Fund (IMF) today completed the third review of the program with El Salvador supported by the three-year Stand-By Arrangement (SBA) approved in March 2010 (see Press Release No. 10/95). Upon completion of the review, a total equivalent to SDR 385.43 million (about US$602 million) has become available to El Salvador, but the authorities intend to continue treating the arrangement as precautionary and not draw the resources.

Following the Executive Board’s discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, made the following statement:

“Program implementation has been strong, despite challenging external conditions and a slow economic recovery. The public debt-to-GDP ratio has stabilized, and financial stability has been maintained. The authorities’ policies remain focused on regaining fiscal space and enhancing the resilience of the fully-dollarized financial system.

“The fiscal consolidation strategy envisaged under the program aims to place the public debt ratio on a downward trajectory. Continued expenditure restraint, including the phasing out of broad-based energy subsidies, and further revenue mobilization are needed to meet the lower 2012 deficit target. Securing a consensus on a fiscal pact will be critical to strengthen tax revenues and the overall fiscal position over the medium term.

“The financial system’s reform agenda is appropriately focused on upgrading the safety net and shifting toward risks-based supervision. Preparations for setting up a lender-of-last-resort facility and improving bank resolution procedures are also under way,” Mr. Zhu said.