Salvadoran banks have been reducing their investments in Treasury Bills, and have stated that they will not increase them until the debt rating improves.
Representatives from the Salvadoran Banking Association (Abansa) acknowledged that since March this year the entities have been reducing their investment in 'Letras del Tesoro' (Letes), due to the delicate fiscal situation facing the government.
It is becoming more and more expensive for the Ministry of Finance to issue treasury bills in the local market, as the growing fiscal deterioration requires investors to demand higher rates in order to offset the risk.
The delicate fiscal situation of the Salvadoran economy is causing more and more concern among investors in the local market, particularly financial institutions, which are ceasing to purchase government securities and increasingly demanding higher rates in order to compensate for the risks involved in financing the State.
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.
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 "...
The Ministry of Finance in El Salvador has scheduled 17 emissions for Treasury Bills for the year 2013.
Elmundo.com.sv reports that "by executive agreement, for this year the Ministry of Finance has scheduled 17 emissions of Treasury Bills. Three tranches have already been issued totaling $75 million. "
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