A recent report by Bank of America, the second largest bank holding company in the United States, highlights that the Salvadoran government has shown that it has the capacity to cope in the coming years without falling into default.
“The government seems to be able to get by for a few more years, even without an agreement with the International Monetary Fund (IMF),” he emphasizes.
The considerations, made by a group of analysts from the financial institution after a visit to the country, indicate that the administration of President Nayib Bukele “is on track to exceed the budget and register a primary surplus in 2022 of 0.5% in relation to the Product Gross Domestic (GDP)”. This is thanks to the effective application of fiscal policies.
The bank’s study is part of the tax collection report of the Ministry of Finance (MH) until July, when the total income tax (ISR) collection stands out, which was $1,909.7 million, an increase of 30.5% compared to the same period of 2021.
“In the first seven months of 2022, total revenue grew four times faster than total expenses. For this reason, the general fiscal deficit of the non-financial public sector is only a third of last year’s deficit, $259 million from January to July versus $722 million in the same period of 2021,” the analysts add.
On the other hand, financial technicians used the term “terror” to refer to the effect of the strong policy against tax evasion applied by the government, since the fear of appearing on the list of “evaders” presented by the Minister of Finance , Alejandro Zelaya, before the prosecutor’s office every Thursday encourages businessmen to fulfill their obligations.
They also mentioned that their forecast for economic growth in El Salvador, given the current numbers, will be 3% by 2022.
Regarding the report, President Nayib Bukele pointed out that Bank of America has been the only institution that has made an analysis consistent with reality.
“Apparently, Bank of America is the only bank capable of doing a decent analysis on El Salvador. They were the only bank that got us right in 2021. It looks like they are doing it again… incredible!” President Bukele said.
On the repurchase of bonds
For Bank of America analysts, El Salvador has the capacity to deal with its debt, thanks to the significant improvement in its fiscal position and the high possibility of carrying out operations that do not affect investors.
“We are convinced that the government will pay the 2023 bonds (what remains after the repurchase operation). We see a low risk of default on that debt,” they said.
In addition, they stated that they disagreed with the perspective of the rating agency Moody’s, which classified the repurchase operation of the 2023 and 2025 bonds as “a worrying exchange.”
“The buyback is not a worrying trade from our perspective. The repurchase is voluntary at the market price, and the government will continue to pay its obligations to those who did not participate,” they said.