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Updated On: Monday, 16 September 2019

El Salvador will strengthen fiscal sustainability with IDB support

Content by: Inter-American Development Bank

A $200 million loan will provide budget support for priority government expenditures, thereby protecting public investment and social program funding to promote inclusive growth

El Salvador will strengthen fiscal sustainability by securing resources for complementary financing of the General State Budget with a $200 million loan approved by the Executive Board Directors of the Inter-American Development Bank (IDB).

The Government of El Salvador has maintained its commitment to continue with the necessary reform processes that the country is implementing in order to advance in the strengthening of fiscal management, with particular emphasis on the efficiency of public spending and pension sustainability, through the implementation of legal instruments of fiscal responsibility and pension systems, as well as the strengthening of the institutional capacities of the State.

The country has implemented a series of structural actions and reforms, which have been supported by the IDB for its development and execution, which highlight the creation of a regulatory framework of fiscal responsibility that promotes sustainability of public finances and increased efficiency and transparency in purchasing processes.

A budget reform will also be implemented that links resources with results and the strengthening of public investment management, as well as measures that simplify regulations and facilitate investment by favoring the productive private sector.

Likewise, measures have been implemented aimed at improving the institutional capacity for tax collection, incorporating the country to international standards of transparency, and the institutional strengthening of the pension system to achieve its long-term sustainability, grant life annuities and improve intergenerational equity.

Fiscal sustainability has direct and indirect benefits for the Salvadoran entire population, promoting the continuous financing of State services, raising the quality of public investments and supports a favorable macroeconomic situation for development and productive activity. The loan will also benefit vulnerable groups (women, children and the elderly) by promoting specific measures that protect social spending.

The IDB loan, for $200 million, has a repayment period of 20 years, a five and a half year grace period and an interest rate based on LIBOR.

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The Inter-American Development Bank is devoted to improving lives. Established in 1959, the IDB is a leading source of long-term financing for economic, social and institutional development in Latin America and the Caribbean. The IDB also conducts cutting-edge research and provides policy advice, technical assistance and training to public and private sector clients throughout the region. 

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