Fusades: El Salvador on the Brink of Debt Default

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.

Tuesday, September 20, 2016

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."

See: "Is there a Way to Reactivate the Salvadoran Economy?"

Argumedo explained that "... 'There potential of a default and we will not have access to international sources of funding. The State will probably have to make an adjustment 25% to its budget, which will result in staff cuts.'"

Weeks ago a union of private companies submitted to the government a proposal to begin addressing the fiscal problem affecting the country, based on four pillars: economic growth, combating and reducing poverty, strengthening democratic institutions, and a fiscal responsibility pact.

More on this topic

El Salvador: $33 Million Approved for Pensions

June 2017

The Ministry of Finance will have to obtain the remaining $47 million to pay, on July 8, the Provisional Investment Certificates and thus avoid falling into default again.

From a statement issued by the Legislature:

The Legislative Assembly approved, with 76 votes, a reform to the Budget Law to reorient $33,064,904.00, for the purpose of providing the necessary resources to urgently meet the payment of obligations generated by the Trusteeship of Social Security Obligations (FOP by its initials in Spanish), money which will be destined for financing the Public Pension System Amortization Fund.

El Salvador: Chain Reaction After Government's Default

April 2017

More expensive external credit, deterioration of the country's image, and higher local interest rates are just some of the consequences that could result from the non-payment of $55 million to pension funds.

The decision taken by the Sánchez Cerén administration not to pay interest to pension funds on the grounds of lack of support from the opposition political party has caused not only a down grading of the debt rating by agencies such as Fitch Ratings and Standard & Poor's, but has also led the business sector to raise its voice about the seriousness of the situation and to warn about possible consequences on economic activity.

El Salvador: Concerns Over State's Ability to Pay

June 2016

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.

Venezuela Next to Default

February 2015

Standard & Poor's has warned of the risk of default in the next two years and reduced the rating for the sovereign debt of Venezuela, the principal debtor of the Colon Free Zone.

From a statement issued by Standard & Poor's:

The Venezuelan government's failure to take timely corrective actions to address growing economic distortions has contributed to economic deterioration and shortages of foreign exchange.

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