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Strengthening the relationship between El Salvador and the International Monetary Fund (IMF) could usher in a new phase for the country’s finances and gradually improve its standing in international markets, according to an analysis by Santander Corporate & Investment Banking, through Santander US Capital Markets. The document examines the potential economic implications of the staff-level agreement reached between El Salvador and the IMF and outlines a scenario involving possible credit rating upgrades.
The analysis maintains that the agreement represents not merely a continuation of the program with the international body but could mark a new stage in the economic transformation process during the upcoming term of President Nayib Bukele’s administration. According to Santander, there is significant political capital available to drive fiscal consolidation measures and structural reforms, which could reduce program execution risks and foster greater market confidence.
One of the main economic effects highlighted in the document is a potential improvement in El Salvador’s credit rating. Santander believes that strengthening ties with the IMF could create conditions for rating agencies to upgrade the country’s rating, which currently sits within the speculative-grade segment. Such an upgrade would allow for a gradual move toward lower-risk categories and, in the long term, even the possibility of achieving an investment-grade rating.
The investment bank cites the Bahamas’ trajectory as a reference point and estimates that El Salvador could advance from the B to the BB category within four to five years, provided there is a successful track record of compliance with the IMF program. For this to happen, the bank notes, fiscal adjustment measures would need to be accompanied by initiatives to attract investment into strategic sectors and by social development programs in areas such as education and health. This projection reflects Santander’s analysis and does not constitute a guarantee regarding future decisions by rating agencies.
An improvement in the credit rating would be significant for the country’s finances, as it could lead to better conditions for accessing financing. The analysis explains that salvadoran debt securities have met with a favorable reaction following the announcement of the technical agreement, and that Eurobonds have moved closer to tighter spreads relative to other issuers rated B and BB. Santander believes that a potential improvement in risk perception could generate greater demand for salvadoran debt.
The document also highlights fiscal consolidation as a key component of the program. According to the analysis, the accumulated primary surplus of the non-financial public sector over the preceding 12 months had already exceeded 2.3% of GDP by june 2026. Santander suggests that continued fiscal adjustment—combined with higher revenues driven by economic growth and more efficient tax administration—could help achieve a structural primary fiscal surplus of 3.7% of GDP.
Another key area identified is structural reform, particularly regarding the pension system. The document outlines changes such as increased contributions and measures to manage liquidity in anticipation of the projected rise in debt service costs in 2027. It also includes reforms focused on transparency and governance, the strengthening of frameworks to combat money laundering and the financing of terrorism, and the public disclosure of asset declarations by high-ranking public officials.
Santander also identifies growth opportunities in sectors such as tourism and manufacturing. The analysis highlights strong tourist arrival figures and suggests that a combination of fiscal discipline, structural reforms, and investment in strategic sectors could drive an economic transformation based on increased investment and improved social indicators.
Regarding education, the document cites artificial intelligence programs and learning platforms developed with support from the World Bank, CAF, and the Inter-American Development Bank. According to the analysis, a PISA-style school assessment conducted on a sample of 1,198 students across 171 public schools showed results in mathematics, reading, and science comparable to those of Germany and Sweden after 18 months of implementation. Santander notes that these results could serve as a basis for expanding the program nationwide over the next 18 months, whereas the next official national-level PISA results are scheduled for 2029.
The analysis suggests that a combination of fiscal consolidation, structural reforms, investment, and social programs could lead to a credit rating upgrade of more than one or two notches within the B category. It also posits that a stronger relationship with the IMF could reduce execution risks and facilitate gradual convergence toward BB-rated countries and, subsequently, toward higher levels.
Upon learning of this scenario, President Nayib Bukele reacted on X with the phrase “Gradually, then suddenly”.The expression was used in reference to the potential gradual process of economic transformation and improved financial conditions described in the analysis.
Overall, the Santander document presents a favorable scenario for El Salvador, provided the country continues to comply with the measures outlined in the IMF program. The expectation is that greater fiscal discipline and progress on reforms could improve risk perception, boost investment, and pave the way for better credit ratings. However, the content itself represents a market analysis by Santander Corporate & Investment Banking, and its projections should be understood as an assessment of the economy’s potential trajectory rather than a confirmation of future outcomes by the IMF.
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