In this regional context of economic crisis, falling fiscal revenues and increasing public debt, Costa Rica's debt level is expected to rise to 75% of GDP by 2021, and in the case of El Salvador, the indicator could exceed 85%.
The outbreak of covid-19 in Central America forced the government to declare severe household quarantines and to restrict several economic activities, restrictions that in some cases are still in place after five months of health and economic crisis.
The budget presented by the Salvadoran government for next year will be 23% higher than in 2018 and increases to $1.613 million the gap to be financed.
The Salvadoran Foundation for Economic and Social Development (Fusades) reported that the draft National General Budget 2019 (PP2019) totals US$6,733.2 million, an increase of US$1,265.7 million (23.1%) over the voted budget 2018 and is equivalent to 24.9% of the gross domestic product (GDP) 1. This is the amount that has been budgeted for the Central Government for 2019, which shows a significant increase with respect to the 2018 voted budget and the gap to be financed is greater, since it will need financing in the order of US$1,612.5 million.
Exporters resent the effects of five continuous days of demonstrations, blockades and widespread insecurity on the roads of Costa Rica.
Before the strike, which was started a few days ago by unions representing the country's public institutions, the Chamber of Exporters of Costa Rica (Cadexco) denounced the fact that companies in the sector are facing multiple difficulties in exporting their products.Puerto Moín, the main outlet for exports, is onlyoperating six hours a day, leaving close to 12,000 tons per day unable to be shipped, which is estimated to be equivalent to almost $10 million in daily sales abroad.
"Public debt in terms of simple average for the Central American region will continue growing, reaching 43.1% of GDP in 2018, after having registered 42.5% in 2017."
The Central American Institute of Fiscal Studies (Icefi) estimates that for the current year the size of public expenditure of the Central Government in relation to the respective Gross Domestic Product of each country will be 21.4% in Costa Rica, 20.4% in El Salvador, 20% in Honduras, 18.4% in Nicaragua, 17.6% in Panama and 12.1% in Guatemala.
Like lemmings running towards a cliff, Costa Rica repeats the kind of actions that underscore the definition of a society incapable of stopping on the road to a terminal crisis.
El Salvador's Congress approved an IDB loan of $350 million to finance the government budget deficit at a 3.25% rate.
The president of the Legislative Assembly, Norman Quijano, stated that " ..." with the conditions offered by the IDB we will have an interest rate estimated at 3.25%, with the bonds we had an average rate of 7 and 8%, the reduction of interests will mean a saving of tens of millions of dollars for the country.' "
The entity recognizes the continued economic recovery, but warns that potential growth is below the desirable level, debt remains high, and wide financing gaps are projected for 2019 and in the future.
From a statement issued by the IMF:
On May 11, 2018, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with El Salvador.
The institution highlights the progress that has been made in reducing the fiscal deficit and stabilizing the debt, but warns that a greater effort is needed to place the debt on a downward trajectory.
From a statement issued by the International Monetary Fund:
In one of the regions that receives the least amount of taxes in the world, the tax burden remained relatively stable in 2017.
From the section Fiscal Outlook for Central America, from the report "Macro-fiscal Profiles: 9th edition", by the Central American Institute of Fiscal Studies (Icefi):
Citizens are less than two months away from going to a ballotage to elect a new government without having discussed the country's priority issues, even though some of them require urgent attention and a deep national discussion in order to find a solution.
Requesting more loans or issuing bonds are the options under consideration by the Ministry of Finance in order to raise funds needed to cover the 2018 budget deficit.
On top of the funds that the Sánchez Cerén administration needs to finish 2017, there is also a shortfall to cover the budget for the next year.The funds needed are for the propane gas subsidy and for servicing debt related to the Preliminary Investment Certificate (CIP by its initials in Spanish).It is estimated that the shortfall is at least $925 million, according to explanations given by the Minister of Finance, Carlos Cáceres.
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.
Fusades estimates that the government is facing a fiscal deficit in excess of $400 million for the remainder of the year, and there is no clarity as to how it will be financed.
The Salvadoran Foundation for Economic and Social Development (Fusades)"... updated its estimates of funding needs for the remainder of the year.In July, it was estimated that the uncovered financial gap ranged from $537.1 million to $622.9 million."
The Salvadoran banking system is maintaining stable performance, despite an operating environment deteriorated by a recent increase in the risk rating for sovereign debt.
From a report entitled "Panorama one of El Salvador's Largest Banks in the First Quarter 2017" by Fitch Ratings:
El Salvador's 'CCC' Long-Term ratings reflect Fitch's assessment that political polarization complicating the sovereign's ability to meet its financing gap for 2017-2018, continues, highlighting the risk for default.
From a statement issued by Fitch Ratings:
Fitch Ratings-New York-28 July 2017: Fitch Ratings has affirmed El Salvador's Long-Term Foreign and Local Currency IDRs at 'CCC'.
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