Tuesday, 29 August 2023 04:43

Economist warns that interest rates are unknown in proposal sent by ABANSA

Written by Leydin Sorto

In a radio interview, the former President of the Banco Central de Reserva (BCR) Carlos Acevedo, salvadoran economist, explained that the bank proposes to change the conditions of short-term debt, which does not exist today. However, the interest rates are not known, which is a component of any refinancing structure.

According to Acevedo, this debt has to be refinanced every year, and according to the press release of the Asociación Bancaria Salvadoreña (ABANSA) they propose to do it in terms of 2, 3, 5 and 7 years, which will allow reducing the levels of short term public debt and obtain a better maturity profile of El Salvador's financial obligations in the medium term.


El Economista points out that the proposal, still unknown to the general public, does not allow for an accurate analysis, since it is not known the interest rate for each term offered in such restructuring, nor if the private banks will continue issuing new debt with the Central Government.

The interviewers questioned the guest as to why the news was made public; for Acevedo it is part of the expansion plan so that the salvadoran population is aware of what will be discussed with the Ministry of Finance.


Last year the Central American Bank for Economic Integration (CABEI) was going to establish a regional debt facility and El Salvador was the country where it was decided to establish it, which means that governments could issue debt and private agents would buy the debt, this regional public debt transaction center would be in El Salvador and the economist Acevedo infers that this proposal to structure the issuance of debt in longer terms fits.

The country risk is below 9% and in july 2022 it reached more than 35% in july last year, which means that El Salvador's country risk has improved significantly in the last year and according to Acevedo if it continues to decrease El Salvador will be able to issue debt in international markets, which is a good sign.


Translated by: A.M