El Salvador: Complaints Over Fiscal Discipline

The governments cash-strapped position is reflected by delays in payments, while it increases short-term public debt and the IMF has suspended the precautionary agreement.

Thursday, May 17, 2012

"Public debt in El Salvador between March 2011 and March 2012 increased by $450 million (+4.3%) to $13,232,000. More than half of this increase ($281.6 million) was generated in the first quarter of this year. Because of the debt, the Government has had to resort to issuing short-term debt which has already reached $710.9 million, while the interest rate of Treasury Bills (LETES) has already reached its maximum rate, 4.25%, from the 0.4% it was before", says a report by the Salvadoran Foundation for Economic and Social Development (FUSADES).

Fusades also criticizes poorly targeted subsidies. For example, the state spent $1.856 billion in grants between 2004 and 2011, which would have funded the construction of 10 ports of La Union, thousands of schools and dozens of hospitals.

"It is time for fiscal discipline and to rein in the expenses," said Carolina Franco, Senior Analyst for International Economics, as quoted by Laprensagrafica.com.

More on this topic

Fusades: El Salvador Could Lose the Stand-by Agreement

November 2011

Failure to meet macroeconomic goals set by the IMF for 2011 would jeopardize the precautionary facility that has been negotiated.

The Salvadoran Foundation for Economic and Social Development (Fusades) has recommended the Government on several occasions to adjust the budget and make a fiscal pact.

El Salvador: Economic Situation Report - First Quarter 2015

May 2015

"The Salvadoran economy continues to stagnate in a cycle of low growth and uncontrollable public debt, while economic and social policies focus on short-term relief, driving away employment opportunities."

From a statement by the Salvadoran Foundation for Economic and Social Development (FUSADES):

El Salvador: Fiscal Deficit to Reach 4% of GDP

November 2012

Projections by the Ministry of Finance are that the fiscal deficit of El Salvador will be $958 million at the end of the year, or 4% of GDP.

Commenting on the subject the technical secretary of the presidency, Alexander Segovia, said they are expecting a smaller deficit at year end, "I can assure you that it will be less than the 4% that is being predicted".

Fusades Demands Comprehensive Solution to the Fiscal Problem

December 2011

The Salvadoran Foundation Fusades has warned that if tax reforms are not accompanied by cuts in public spending they will have a negative impact on employment and investment.

A press release from the Salvadoran Foundation for Economic and Social Development reads:

The fiscal situation is critical and unsustainable.

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