El Salvador: Businesses Demand Fiscal Responsibility Law

The private sector demands limits on the government's ability to borrow, through means of a Fiscal Responsibility Law.

Monday, June 16, 2014

From a press release issued by the Chamber of Commerce and Industry of El Salvador (Camarasal):

The Camarasal has expressed dissatisfaction with the fact that the Legislature has authorized the government to issue a new bond debt for $1.156 million, without having first limited the state's debt capacity through the adoption of a Fiscal Responsibility Law.

We believe that while no legal limits are established on the financial commitments that the government can acquire on behalf of all Salvadorans, it will never be possible to halt the spiraling public debt that keeps the state's finances in constant imbalance and slows the country's capacity for growth.

Taking in to consideration the fact that high level of total public debt, which now stands at around $15,000 million, equivalent to 62.5% of GDP, is the main cause of the low sovereign risk rating given to the country by international rating agencies, the acquisition of new debt needs to be subject to compliance with requirements of fiscal responsibility by the various agencies of the public sector.

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El Salvador: Significant Progress on Fiscal Matters

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The government and the opposition have finally reached an agreement and approved the Fiscal Responsibility Law along with the issuance of $550 million in debt securities.

The issuance authorized by the Assembly may be made on the international or local market, and funds will be used to pay principal and interest on short-term debt, budget support and strengthening of the Fiscal Fund at the General Treasury of the Republic.

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El Salvador: Call for Fiscal Responsibility

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Businessmen are asking for "... the establishment of concrete commitments and legal limits on the financial debts that the government may take out in the name of all Salvadorans."

From a statement issued by the Chamber of Commerce and Industry in El Salvador:

Approval of new issues of government bonds are not the solution to the problem of the government's lack resources, until there is a Fiscal Responsibility Law to address comprehensively the problem of sustainability of public finances, there is no guarantee that the government will not continue acquiring more debt which is not translated into improvements in the areas of security, education, health, infrastructure and other essential services for the population.

Panama Starts to Lose its Way Financially

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The National Assembly has approved raising the maximum limit for government borrowing to 4.1% of GDP, above the 3.9% originally requested by the Executive.

The Assembly amended the project which initially envisaged raising the limit on the fiscal deficit from 2.7% to 3.9%, to bring it up to 4.1% of GDP.