Press Release No. 25/069

IMF Executive Board Concludes 2023 Article IV Consultation with El Salvador

March 19, 2025

Washington, DC: On March 20, 2023, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation^[1] with El Salvador.

Despite a series of adverse external shocks, the Salvadoran economy has fared relatively well to date, and is estimated to have grown by 2.8 percent in 2022. Annual inflation jumped to 7¼ percent, mainly due to high global food prices while fuel price inflation was moderated by large subsidies. Vulnerabilities mounted, with international reserves falling below 2 months of imports. In the context of limited financing options, the fiscal deficit narrowed to 2½ percent of GDP, but fiscal policy is expected to turn expansionary in 2023. Under current policies, public debt is on an unsustainable path. 

The economy is expected to grow by 2.4 percent in 2023, but the outlook is fragile, given the macroeconomic imbalances and a less favorable international environment. A comprehensive and credible policy package is urgently needed to put public debt on a firmly declining path and strengthen macroeconomic and financial stability.

Over a year after the adoption of Bitcoin as legal tender, its use has been minimal but risks for financial and market integrity, financial stability, and consumer protection remain and need to be addressed. 

Executive Board Assessment^[2]

Executive Directors noted the strong post‑pandemic recovery supported by the authorities’ timely responses to shocks and the improved security situation. Pointing to the fragile outlook amid rising risks and vulnerabilities, Directors urged the authorities to adopt a comprehensive plan to address macroeconomic imbalances, including unsustainable public debt and limited reserve coverage, along with structural reforms to support stronger, inclusive growth.

Directors welcomed recent fiscal efforts but underscored the urgent need for an ambitious fiscal consolidation plan, based on greater revenue mobilization and efficiency of spending, including better targeting energy subsidies and social safety nets and rightsizing the wage bill. This is critical to put public debt on a firm downward trajectory and allow a gradual return to international capital markets. Restoring and upgrading the Fiscal Responsibility Law would also improve the transparency and credibility of fiscal policy. Directors stressed the importance of ensuring the sustainability of the pension system to limit contingent liabilities.

Directors noted that the banking system remains healthy but cautioned against rising exposures to the sovereign and the erosion of liquidity buffers. They called for raising banks’ reserve requirements, enacting promptly the Financial Stability Bill, closing regulatory gaps, and continuing to implement the 2020 Safeguards Assessment recommendations.

Directors underscored the importance of narrowing the scope of the Bitcoin law and removing Bitcoin’s legal tender status. They noted that while Bitcoin has had a minimal impact on financial inclusion, high risks to financial integrity and stability, fiscal sustainability, and consumer protection persist. Directors urged that Bitcoin transactions be transparently disclosed, together with the financial statements of public companies operating in the Bitcoin ecosystem. They also called on the authorities to carefully weigh the implications of the new crypto assets legislation and avoid expanding government exposure to Bitcoin.

Directors stressed the importance of structural reforms to strengthen governance, the investment climate and productivity. They called for continued efforts to strengthen fiscal transparency, public procurement, AML/CFT legislation, and the independence of the judicial system. Directors also stressed the importance of enhancing human capital, infrastructure, and climate resilience, as well as continuing to upgrade the statistical framework.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summing up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm.