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The International Monetary Fund (IMF) and the Government of El Salvador have reached a technical agreement to implement a 40-month program under the Extended Fund Facility (EFF), with financing of approximately US$1.4 billion. This agreement seeks to address the country’s balance of payments needs and support an ambitious economic reform plan. Its final approval will depend on the IMF’s Executive Board and the fulfillment of prior agreed actions.
The program also expects to mobilize additional financial support from international organizations such as the World Bank, the Inter-American Development Bank and other regional banks, consolidating a global package of more than US$3.5 billion. This will strengthen the country’s fiscal and external stability, as well as create the necessary conditions for inclusive economic growth.
On the fiscal front, the plan calls for an improvement in the primary balance equivalent to 3.5% of GDP over three years, with adjustment measures that include a reduction in public spending and an improvement in the efficiency of tax revenues. These actions seek to reduce public debt, which is estimated to reach 85% of GDP in 2024, and ensure fiscal sustainability in the medium term, while protecting the most vulnerable sectors.
The program also prioritizes governance and transparency, with reforms aimed at strengthening accountability in areas such as public debt, government contracts and state-owned enterprises. In addition, measures will be implemented to combat corruption and improve mechanisms to prevent money laundering and the financing of terrorism, in line with international standards.
In the financial sector, we plan to strengthen banks’ liquidity buffers and adapt banking regulation to Basel III standards, thus promoting the stability of the financial system. IMF financing will also contribute to increasing the country’s international reserves, strengthening its capacity to respond to possible economic crises.
Regarding the use of digital assets, the program includes reforms to delimit public sector participation in Bitcoin-related activities and ensure that its use in the private sector is voluntary. In addition, the supervision and regulation of the digital asset industry will be strengthened, promoting financial stability and the protection of consumers and investors.
This agreement comes in a context of economic recovery driven by remittances and tourism, although macroeconomic and structural challenges persist. The salvadoran authorities and the IMF are confident that this program will boost the country’s prosperity, strengthening its economic and social stability.
The IMF Executive Board is expected to evaluate and approve the program in february 2025, once the commitments established as preconditions have been fulfilled.
