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