The decrease in tax revenue, mainly from value added tax and customs tariffs, have prevented the timely payments of the State’s obligations.
The elimination of the electricity subsidy payments, which affects those who consume in excess of 99 kilowatts, was a decision that was forced upon the Salvadoran government by the decline in revenues in the face of the economic downturn affecting the country.
As a result of sustained economic reforms over the last couple of years, El Salvador’s macroeconomic fundamentals are relatively solid.
Like in other Central American countries, however, economic growth has
decelerated in recent months on the back of the U.S. slowdown and still high commodity prices. The global financial turmoil and, possibly, electoral uncertainty, have led to some tightening in domestic financial conditions.
Despite the electoral year and the economic crisis, public investment projects will continue, indicated Eduardo Ayala Grimaldi, technical secretary of the presidency.
According to Elsalvador.com: "About $700 million is budgeted for investment. Part of the monies had been set aside in the last budget and passed on to the one for 2009, not because the works did not start, but because they were tendered at the end of the year," Ayala Grimaldi said as a justification for the public construction projects that were outstanding from last year."
Eduardo Ayala Grimaldi, technical secretary at the office of the president, announced that the bidding process is already open for first section of the Northern Longitudinal Highway.
According reports from elsalvador.com: "We expect that the physical work will begin during the first quarter of 2009, before the end of this government's term," said Ayala, who is also the president of Fomilenio.
In Central America, Fuentes of Guatemala is at first with 5.1, followed by Handal of El Salvador, then Zuniga of Costa Rica and Alexander of Panama at 5.9, and then by the Honduran and Nicaraguan Ministers at 3.8 and 3.5 respectively.
A panel of 140 economists from the region responded via email to a survey by AmericaEconomia Intelligence in which they were asked to give their opinion about the performance of the public finance. The results were used to rank the ministries of finance based on the perception of the experts on whether they were doing a good or bad job.
Electricity companies announced that there will be an increase in energy rates if Cel does not fulfill its commitment to subsidize consumption.
The scarcity of liquidity in the financial market could be the reason the Rio Lempa Executive Hydroelectric Commission (CEL) has not been able to pay the $94.7 million in subsidies claimed by the generating and distributing electric companies, according to the Technical Secretary oh the Presidency, Eduardo Ayala Grimaldi.
In an effort to increase tax collections, El Salvador's Finance Department has offered tax amnesty to past evaders in hopes that they will pay up in the future. The government hopes to collect an additional 25 million dollars with this strategy.
Finance Minister William Handal said the measure will be published in the Official Gazette this week and will take effect at once.