El Salvador has reached a significant milestone in its economic recovery and reform efforts, following a staff-level agreement with the International Monetary Fund (IMF) as part of the first review of its 40-month Extended Fund Facility (EFF) program, totaling $1.4 billion. If approved by the IMF Executive Board in the coming weeks, this agreement would unlock a disbursement of approximately $120 million in financial support.
The IMF praised the government’s commitment and performance, highlighting that most of the initial program objectives were met and that structural reforms are progressing steadily. This collaboration reflects a mutual commitment to fiscal consolidation, economic stability, and long-term sustainable growth in El Salvador.
According to Rodrigo Cubeddu, Deputy Director of the IMF’s Western Hemisphere Department, and Iván Luis Torres, IMF Mission Chief for El Salvador, “The program’s performance has been strong. The main fiscal and reserve targets were met with margins, and substantial progress continues to be made on an ambitious reform agenda in the areas of governance, transparency, and financial resilience.”
Despite a complex international economic environment, El Salvador’s economy continues to show resilience, supported by strong remittance flows and renewed confidence among economic actors. Lower inflation rates and a reduced current account deficit have also been attributed to prudent fiscal policies and improved terms of trade.
Central to the IMF-supported program is El Salvador’s fiscal consolidation strategy, which includes reducing current expenditures and preparing structural reforms in public service and pension systems. These efforts are expected to be reinforced by the upcoming Fiscal Sustainability Law.
In addition to domestic reforms, the Salvadoran government has committed to enhancing its external financial position by boosting Central Bank deposits and tightening liquidity requirements for the banking system. Strengthened banking supervision, including for cooperatives, is also part of the ongoing reforms.
The IMF highlighted governance as a critical pillar of the agreement, welcoming the recent enactment of the Anti-Corruption Law. The focus now shifts to ensuring effective and timely implementation to strengthen transparency and public sector accountability.
“Steady program implementation and agile policy, in a context of growing global uncertainties, are key to strengthening stability and laying the foundation for stronger and more sustainable growth,” the IMF concluded.
The Fund also commended the Salvadoran authorities for their constructive engagement, emphasizing that continued cooperation will be essential for the program’s success and the country’s long-term economic transformation.