Fitch Ratings has affirmed that El Salvador’s recent $1.4 billion agreement with the International Monetary Fund (IMF) will play a crucial role in supporting fiscal consolidation and boosting the country’s financial resilience.
In a statement, the rating agency highlighted that the program will ease financing restrictions and reduce fiscal pressures, ultimately strengthening the central bank’s gross reserves and enhancing the country’s ability to meet its payment obligations.
The IMF approved the 40-month program last week under the Extended Credit Facility (EFF), granting an immediate disbursement of approximately $113 million. This agreement is also expected to unlock additional financing from multilateral institutions such as 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), potentially reaching a total of $3.5 billion during the program period.
Following the announcement of the initial deal between the Salvadoran government and the IMF, Fitch had already upgraded El Salvador’s credit rating to B- from CCC+, with a stable outlook. The agency now anticipates that the IMF program, along with other multilateral financing and a manageable current account deficit in 2025, will further bolster reserves, which are projected to reach $4.4 billion next year.
Fitch also emphasized that the program’s fiscal consolidation measures will improve El Salvador’s financial standing, targeting a primary balance surplus of 1.2% of GDP by 2025. The agency noted that the 2025 budget includes key measures for achieving the necessary adjustments, with an expected fiscal improvement of 1.8 percentage points this year.
Additionally, the approval of the IMF program is expected to enhance the country’s financial stability by increasing banking system liquidity buffers to 15% of deposits by late 2026, up from the current 11.5%.
Fitch concluded that successful implementation of fiscal consolidation efforts could open opportunities for El Salvador to access greater financing in international markets, further supporting long-term economic growth.