The International Monetary Fund (IMF) has approved a 40-month, $1.4 billion program for El Salvador under the Extended Fund Facility (EFF) mechanism. This approval will enable the Salvadoran government to receive an immediate disbursement of approximately $113 million.
The agreement is expected to attract additional financing from multilateral organizations, including the World Bank (WB), the Inter-American Development Bank (IDB), the Central American Bank for Economic Integration (CABEI), and the Development Bank of Latin America (CAF). These contributions will form a total package exceeding $3.5 billion over the program’s duration.
President Nayib Bukele reacted to the announcement on social media platform X with the message: “Patience and trust.”
Strengthening Economic Stability and Governance
The funds will be directed toward addressing balance of payments needs and supporting economic initiatives aimed at enhancing macroeconomic stability and governance. The program includes reforms to improve public spending efficiency, optimize resource management, and increase transparency in government operations.
Additionally, the initiative aims to bolster fiscal sustainability and reduce financing costs through strategic reforms in public administration, the pension system, and revenue mobilization.
Nigel Clarke, Deputy Director General and Interim President of the Executive Board, emphasized that the agreement builds on El Salvador’s economic progress and enhanced security environment, which have led to increased remittances and tourism.
“The Salvadoran economy is expanding steadily thanks to strong remittances and tourism, and a greatly improved security situation. External deficits have been reduced, inflation has decreased, and recent liability management operations have reduced short-term financing needs,” Clarke stated.
Commitment to Transparency and Fiscal Growth
Clarke also highlighted governance and transparency improvements, such as new anti-corruption legislation and the publication of financial audits by the Court of Accounts, including COVID-related audits, as key factors contributing to the agreement’s approval.
The Bukele administration expects the program to enhance El Salvador’s credit profile and facilitate access to multilateral resources at more favorable rates. The government aims to improve the primary balance by 3.5% of GDP within three years through measures such as wage bill optimization and reductions in non-essential spending, without affecting infrastructure and social program investments.
At the same time, the plan projects an increase in international reserves and financial system stability, with a gradual rise in bank liquidity buffers from 11.5% to 15% by June 2026.
An Agreement Based on Progress
By the end of 2024, family remittances reached $8.48 billion, reflecting a 2.5% increase compared to the previous year. In the same period, El Salvador welcomed 3.9 million international visitors, marking a 17% increase year-over-year.
The Central Reserve Bank (BCR) reported that the country closed 2024 with an annual inflation rate of 0.3%, the lowest in the past four years and one of the lowest globally. Additionally, tax revenues hit a record $7.65 billion, reflecting a 7.1% year-on-year increase, equivalent to an additional $504 million compared to 2023.
With this agreement, the Salvadoran government aims to continue strengthening the nation’s economic framework, improving financial stability, and fostering long-term growth.