Fusades Demands Comprehensive Solution to the Fiscal Problem

The Salvadoran Foundation Fusades has warned that if tax reforms are not accompanied by cuts in public spending they will have a negative impact on employment and investment.

Wednesday, December 7, 2011

A press release from the Salvadoran Foundation for Economic and Social Development reads:

The fiscal situation is critical and unsustainable. From 2007 to 2011 the total public debt rose from 43% to 56% of GDP, spending grew due to widespread increases in benefits and wages, while investment declined. The path to correct the fiscal situation was detailed in the "Stand-By Agreement" between the Government and the International Monetary Fund (IMF) in 2010, which the country must comply with.

The economic and social impact of public debt will be very high if there is no short-term fiscal adjustment. The consequences of continuing will include: loss of credibility, increased interest rates, restricted access to financing, risk rating reduction and suspension of access to contingency loans. But most importantly, delaying fiscal adjustment will lead to a socially destructive economic crisis, as is being seen in some European countries.

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