IMF Praises El Salvador’s Economic Reforms and Policy Implementation
The authorities have made significant progress in implementing their economic reform plan under the IMF-supported program. Most program targets set for the first review were comfortably met, and implementation of the structural benchmarks is progressing well. Meanwhile, despite a more challenging external backdrop, El Salvador’s economy continues to expand, supported by improved confidence and still robust remittances. Prudent policies and more favorable terms of trade have led to a reduction in inflation and the current account deficit.
Against the backdrop of early strong program implementation, understandings have been reached on policies to continue to secure program objectives, including with the technical support from the Fund and other development partners:
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The fiscal consolidation will continue this year through cuts in the wage bill and current spending restraint, and plans are being developed to reform the civil service and the pension systems to underpin the adjustment beyond this year. This will be supported by the new Fiscal Sustainability Law, which is expected to be enacted shortly.
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External buffers will be strengthened further through the accumulation of government deposits at the Central Bank, supported by financing from International Financial Institutions and fiscal discipline. Meanwhile, bank liquidity requirements will be raised in line with program commitments, while bank oversight is strengthened, including of cooperatives.
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Following the adoption of the Anti-Corruption Law, attention will now focus in securing its proper and timely implementation to complement ongoing efforts to enhance governance, accountability, and transparency, including of the fiscal accounts of the overall public sector.
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On Bitcoin, efforts will continue to ensure that the total amount of Bitcoin held across all government-owned wallets remains unchanged, consistent with program commitments, while also securing the unwinding of the public sector’s participation in the Chivo wallet by end-July.
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