Wednesday, March 22

The IMF warns El Salvador that debt projection at 96% of GDP is “unsustainable”

The International Monetary Fund (IMF) warned The Savior that the fiscal deficit this 2022 will grow 5% of the Gross domestic product (GDP) of the country and that “under current policies, public debt is expected to rise to around 96% of GDP in 2026 on an unsustainable course.”

The financial institution, based in Washington, recognizes that the government headed by Nayib B Watch did a good job of managing the coronavirus (COVID-19) pandemic and that the economic recovery has been rapid, after the contraction of 7.9% in 2020, and that this year growth could stabilize in the order of 3.2%.

He points out that the granting of fast loans so that The Savior coping with the COVID-19 pandemic increased debt, and 10 straight years of economic growth came to a halt, but thanks to “robust external demand and resilient remittances,” the rebound is expected.

for the economist Romel Rodriguez, from National Development Foundation (Funde), the IMF recognizes the government’s strategy to deal with the pandemic.

“But it tells you something very important: that during this period public debt rose so much that it entered an unsustainable trajectory, for which a fiscal adjustment is urgently required to raise public revenue and increase quality spending,” he said. Rodríguez to the Voice of America.

In a press release from the IMF Released this week, the financial institution said that the board of directors agrees that El Salvador needs to increase fiscal consolidation as of this year “based on income measures” that leads the country to “restore fiscal sustainability and put the public debt on a steady downward trajectory.

Rodríguez added that the IMF authorities hope that the Salvadoran government will make this adjustment quickly and that “anti-money laundering mechanisms will be strengthened,” among other measures that “are at the level of international standards.”

Bitcoin usage effect

The directory of IMF also warned El Salvador about the impact of Bitcoin as legal tender in El Salvador, approved in June 2021 and put into effect in September due to the “great risks associated with the use of bitcoin in financial stability, financial integrity and consumer protection”, points out the multilateral organization.

The IMF has also pointed out the country risks with the government’s plan to issue bonds Bitcoin in the first quarter of this year for the construction of Bitcoin City, that the Salvadoran government plans in the eastern coastal zone of the country.

These are serious messages -deepens, the economist Rodríguez- regarding the “call to the authorities to desist from using Bitcoin as legal tender, because due to the fiscal situation that the country is in, derived from that indebtedness, it What Bitcoin does is exacerbate the risks, but it seems that the authorities are either not interested or have not understood the effects of this,” he said.

Given the warning of IMF, President Watch He published a meme on his social networks in a mocking tone at the call of the financial institution.

Neither the president nor high-level officials of his administration have responded with technical positions on the matter.

Thomas Guevara
Washington, D.C.
voice of america