Press Release No. 24/302

IMF Staff Statement on El Salvador

August 6, 2024

Washington, DC: An International Monetary Fund (IMF) mission led by Mr. Raphael Espinoza issued a statement following in person and virtual discussions over the past months with the Salvadoran authorities. These discussions focused on policies that could be supported by an IMF program to address macroeconomic imbalances and strengthen El Salvador’s medium-term growth prospects and resilience.

“Progress has been made in the negotiations toward a Fund-supported program, focused on policies to strengthen public finances, boost bank reserve buffers, improve governance and transparency, and mitigate the risks from Bitcoin.

On the fiscal side, preliminary understandings have been reached on improving the primary balance by around 3½ percent of GDP over a three-year period to place public debt on sustainable path. Consolidation is expected to be achieved through a balanced set of measures, with initial focus on rationalizing the public wage bill, while providing space for critical social and infrastructure spending.

Progress was also made on developing a plan to gradually strengthen financial system reserve buffers in a manner consistent with continued private sector credit and growth. This is also being supported by efforts to reduce the government’s reliance on domestic financing through the planned consolidation and potential support from the Fund and other multilateral development banks.

On the structural side, preliminary understandings were reached on a comprehensive multi-year strategy to enhance governance, transparency, and the overall investment climate . The authorities are well advanced in preparing legislative proposals to address corruption, money-laundering vulnerabilities, and weaknesses in the procurement frameworks. This work is being supported by development partners and aims to ensure frameworks are consistent with international best practices.

On Bitcoin, while many of the risks have not yet materialized, there is joint recognition that further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks from the Bitcoin project. Additional discussions in this and other key areas remain necessary.

The Fund team looks forward to maintaining its close engagement with the Salvadoran authorities with the objective of reaching agreement on policies that will ensure stability and prosperity for the benefit of all the Salvadoran people.