The favorable conditions in the global economy allowed the country to grow by 4.25% in 2016, and administrative efforts to reduce the fiscal deficit were noted, however they will not prevent the debt /GDP ratio from growing.
Of the $100 million in debt that the government intended to place on the local market, offers were received for only $1 million.
The government was not able to place all of the debt securities it intended to, only managing to capture the interest of one bank, which bought $1 million in debt at a one year term and with an interest rate of 6.5%.
Once again a warning has been given that without a fiscal agreement the country is at high risk of falling into debt default and losing access to international funding.
Elsalvador.com reports that "...Pedro Argumedo, from the Department of Economic and Social Studies at Fusades, said it is important to reach a Tax Agreement, as failure to do so would lead to consequences that would be 'terrible', and time is growing ever shorter."
The Solis administration has restructured its debts in order to postpone for three years the payment of $842 million for domestic debt titles.
Although the government of Luis Guillermo Solís calls it "the best period in debt swaps in the history of the Ministry of Finance", the decision to redeem debt securities maturing between September 2016 and December 2017 for securities with maturities of more than three years, helps improve the maturity profile, but in reality it is "kicking down the line" a serious cash flow problem that needs to be resolved urgently.
The government looks like it will be unable to cope with its obligations in the second half of the year, because "there is no money to make it to the end of the year."
Figures from the Salvadoran Foundation for Economic Development (Fusades) indicate that the current balance of government debt (Treasury bills) now exceeds $900 million, and to meet its obligations in the second half of the year $500 million more is needed, which will have also have to be borrowed.
An announcement from Moody's confirms the limited room for maneuver left to the country when obtaining external financing, compromising access to credit for the private sector.
Costa Rica has received a new warning over a possible lack of access to funds in the international market with which to alleviate its growing fiscal deficit. After China's decision not to buy $1 billion in bonds , the rating agency Moody's anticipates a rise in interest rates in the country and a deterioration of credit and growth.
The new administration has announced that the placement will be in the local market and resources will finance the 2016 budget.
The Ministry of Finance (Minfin) has released the rules for the bond issue and financing needed to make up the shortfall in resources for the new Guatemalan government.
Julio Héctor Estrada, head of the branch, told Elperiodico.com.gt that "we will be turning to the local market next week. The decision has been made because only half of the Bonds can be issued in the first half (Q4.7 billion, about $607,274,371) and that is not enough to make an issue abroad. But with this we will be able to breath life into the functioning of the government and although tax collections are above target, we will need Bonds because of cyclical spending ".
In the second half of the year the Ministry of Finance plans to raise on the local market $1,800 million, 10% of what was raised in the same period in 2014.
Without solving the underlying problem of high public spending, the government is sticking with its strategy to issue debt in the Costa Rican local market, which not only increases the already swollen government debt, but also influences the structure of interest rates in the local market, pushing them up to compete for funds with other local market participants.
A poorly developed state budget and unmet income targets are preventing control of the growth of total public debt, which has already reached 57% of GDP.
According to top analysts from El Salvador, the main cause of the runaway national debt is the lack of planning and transparency with which the national budget is prepared. "... Revenues are overestimated, as they predict higher economic growth rates than can actually be achieved, and the performance of the economy depends on tax collection. Moreover, costs are underestimated or not included, especially in areas such as subsidies and tax refunds. "
Experts are warning that the rapid growth of public spending could have negative implications if conditions change in the economic environment.
After the Ministry of Finance raised the ceiling on the deficit for the nonfinancial public sector to 4.1% at the end of September 2014, there are now significant differences between income and expenses, resulting in a deficit of $2.07 billion.
An announcement has been made that in the short-term auctions of securities by Panamanian State will no longer be made in the local market and instead will be carried out through the Bloomberg platform.
Given the lack of investment in technology on the part of Panamastock exchange, the government has announced that it will begin making the auctions using the Bloomberg platform. The will allow for more transparent transactions by the State.
Fitch Ratings has maintained its BB-rating but noted prevailing structural weaknesses such as low competitiveness, crime, weak human capital and the high cost of energy.
From a press release issued by Fitch Ratings:
Fitch Ratings has affirmed the long-term long-term debt rating in both dollars and local currency at 'BB-'. Fitch also affirmed the ratings of bonds in foreign and local currency without gurantee from El Salvador at 'BB-', maintaining the negative outlook.
With $300 million in funding from the BCIE payments will be made on domestic debt which is currently concentrated in the welfare institutes which will be able to invest in productive projects.
Welfare institutes of the public pensions administrators are creditors of 64% of domestic debt issued by the State and as the average term to maturity of this debt is 2.7 years, the government will seek to refinance at longer terms and with more favorable interest rates.