May
International Meddling, Politics
No report about the IMF loan to El Salvador
El Faro has reported how the Salvadoran government never really listened to the Emergency Fund Committee before taking any economic action, which led to the civilian members’ resignation.
Besides not knowing how 100,000 beneficiaries of the $300 donations were selected, another worrisome detail is the fact that the group did not participate in asking (and receiving) a loan from the International Monetary Fund.
The Government arranged with the IMF a loan of about $400 million. On paper, all aid must be destined to emergency care, mainly on health and care for the most vulnerable. The Committee did not know how these funds were negotiated or how they will be used.
(On April 14th) the International Monetary Fund reported on its official website, that it had approved a loan of $389 million for El Salvador. The funding agreement, however, never passed through the Committee’s control. In other words, the Government negotiated the terms to obtain these funds behind the Committee’s back.
On April 4, the Minister of Finance (Nelson) Fuentes and the president of the Central Reserve Bank, Nicolás Martínez, informed in a letter to the managing director of the International Monetary Fund, Kristalina Georgieva, about initial projected costs of economic measures to attend the effects of the pandemic. “Measures to prevent, detect, control, treat and contain the spread of the coronavirus can cost 900 million dollars (3.5% of GDP), and to this we must add the loss of income that is expected to deteriorate the 2020 Budget by 8 points of GDP, so we could require additional financing of $1.3 billion”, says the letter signed by both officials.
The letter states that the Government is committed to implement fiscal adjustment measures -more taxes- from 2021 to 2024. “We commit ourselves to make a gradual fiscal adjustment of at least 3 points of GDP with permanent measures to be implemented between 2021-2024 so that the primary fiscal balance reaches 3.5% of the GDP by the end of 2024, to place the debt on a downward trajectory to meet the goal of the Fiscal Responsibility Law of reducing the debt to 60% of the GDP by the year 2030”, write Fuentes and Martínez. The shared projections to Georgieva and the agreement to make this fiscal adjustment in exchange for the 389 million do not appear in the meeting minutes of the Committee appointed to supervise the creation of such fund. The Committee asked for more information. Treasury promised to give it on the May 11th session.
On May 11, the private secretary Ernesto Castro informed the civilians in the Committee that they could not receive them at the Presidential House and that the meeting was to be held by video call. That meeting ended with their resignation.
You can read it all here (in Spanish).
