The characteristics of the pension system after the recently enacted reform according to the IMF should be periodically evaluated based on a new independent actuarial study.
Specifically, the 30% increase in pension entitlements will accelerate decreases in funded accounts and will likely result in higher liabilities for the Central Government in the medium term.
Similarly, although the proposed debt swap between the old bonds issued by the Fideicomiso de Obligaciones Provisionales (FOP) and the new bonds issued by the Instituto Salvadoreño de Pensiones (ISP) could provide some temporary cash relief to the government, it would reduce the funds available for private investment and accentuate the concentration of funds in public sector securities.
Importantly, the reform could create large contingent liabilities, as the new law grants a blanket public guarantee for all pension-related entitlements.
Translated by: A.M