El Salvador: Dangerous Increase in Government Debt

Instead of cutting back on spending, the State has once again called on the Legislature to approve borrowing another $900 million, which will bring total debt to a record of nearly $17 billion.

Thursday, April 23, 2015

Currently it is estimated that GDP is around $25 billion, meaning that state debt represents 68% of national production, excluding interest payments.

The economist Claudio de Rosa, told Elsalvador.com that "... Faced with an increasingly tight fiscal scenario, the only option left will be more taxes and other adjustments to subsidies, as well as a pension reform which will decrease benefits for citizens. Instead of being concerned about giving more money to bad public policies they should be looking for proposals that are efficient and effective at solving problems. "

"... The most common form of debt taken on by the government is Treasury bills, because it does not require approval from the Legislature. And it is precisely to 'clean the slate' that the government has issued more debt securities in order to keep taking on more debt. Up to March this year the balance of Treasury bills was $484.2 million, with monthly placements of $43.1, $77.7 and $35 million in the first months of the year, and zero payment. "

More on this topic

Ambitious Plan for External Debt

November 2018

In Costa Rica, the Alvarado administration will ask the Congress for authorization to issue Eurobonds in international markets for at least $5 billion.

The Finance Minister, Rocío Aguilar, reported on November 20 that the country's public debt plans include the possibility of attracting more resources in the international market. One of the alternatives would be to place $5 billion in the next four years.

El Salvador has Only Small Margin for Borrowing

September 2016

The government has already reached 72% of the maximum amount of issuance of Treasury Bills that is permitted by law, and it only has $370 million available to borrow this year.

Given the critical fiscal situation, the Sanchez Ceren administration is insisting in the Legislature on the approval of a bill to issue another $1.2 billion in debt. According to the government, several commitments can not meet unless these funds are available. For the remainder of the year the only remaining possibility is the issuance of $370 million in short-term debt in the local market.

El Salvador to Issue $350 million in Bonds

November 2014

The Ministry of Finance plans to issue before the end of the year the balance remaining on the $1,150 million in bonds approved by Congress in May.

Amid criticism from the opposition and the private sector over the continued increase in public debt, the government is preparing for the end of the year the issuance of $350 million, the remainder of the $110 million which was requested and approved by Congress in May.

El Salvador: Legislators Vote No to Tax Reform

May 2014

The opposition in the Assembly is calling for government approval of the bill on fiscal responsibility before approving the issuance of debt of $1.15 billion and a proposed tax package.

The lawmakers argued that there is a need to thoroughly scrutinize the text of the proposed reforms, as there is uncertainty over the destination the government will chose for the proceeds as well as strategies to revive the national economy in order for the state to ensures there is liquidity rather continuing to generate more debt for the country.