Financial Times Highlights Economic Stability in El Salvador Thanks to Security and Anti-Evasion Measures.

A recent publication in the Financial Times pointed out that El Salvador is enjoying economic stability and has avoided default risks, thanks to measures taken by President Nayib Bukele’s government to combat violence and crime, as well as tax evasion by businesses in the country.

The publication highlighted that international organizations such as the International Monetary Fund (IMF) have recognized the country’s secure environment as one of the main factors behind El Salvador’s stable economy, which has kept it away from the negative forecasts that these same organizations had previously made.

“Fitch Ratings said that a ‘default of some sort’ would likely downgrade the country’s debt rating to junk territory. Moody’s did the same. At their low point in July 2022, Salvadoran bonds maturing in 2025 and 2027 traded at 26.38 and 25.13 cents on the dollar, respectively. But times have changed. In February, Moody’s changed its outlook from negative to stable, citing ‘lower risk of a credit event in the short term’ and ‘manageable’ repayments of the 2025 bond. Its 2025 and 2027 debts are now trading at 78.39 and 55.92 cents on the dollar,” the magazine stated.

“El Salvador regained the favor of many investors in July 2022 after announcing a $1.6 billion bond buyback using IMF special drawing rights and a $200 million loan from the Central American Bank for Economic Integration. Repurchases in September and December reduced the 2025 bond’s outstanding capital from $800 million to $348 million,” it added.

Likewise, the Financial Times publication highlighted that “the country is even earning a certain reputation for financial prudence.” “According to Fitch, the government’s fiscal deficit was 2.7% of GDP in 2022, down from 5.7% in 2021 and 10.1% in 2020, driven by the post-pandemic economic rebound, subsidy cuts, and higher tax collections,” it added.

“While Bukele’s crime initiatives have not won him the love of human rights defenders, the ‘unprecedented crime reduction’ has contributed to solid economic and investment activity, the IMF says. Bukele asked Congress to agree to a state of emergency last March, giving him the power to pursue the notorious Barrio 18 and MS-13 gangs. Less crime means there are many attractions for investors, as well as Bitcoin fanatics, surfers, and Miss Universe contestants,” it also explained.

Another point highlighted by the Financial Times is that “in December, the government approved a pension system reform bill that imposed a cap of $3,000 per month and gave it the ability to tap private pension savings as a source of revenue.”

“Public debt has also declined to 78% of GDP, down from 82.4% in 2021. The IMF says the economy is set for moderate real GDP growth in 2023, 1.7%, after expanding 2.8% last year. This is in line with its peers in Latin America and the Caribbean but below its peers in the group of emerging and developing economies,” it added.

In conclusion, El Salvador’s economic stability and growth are being recognized internationally, and the country’s efforts to combat violence, crime, and tax evasion, as well as its financial prudence, are being highlighted as important factors behind this achievement.