Conversations indicate that the body made $ 389 million in April of the year before. The elevated debt and the small margin of maneuver the he intensified. The FMI can dispose of its money, but also requires strict fiscal measures.
The governor of Nayib Bukele negotiated months ago and with the mayor intensified a stand-by agreement with the International Monetary Fund (FMI) in view of the small margin that must be used to increase the accumulated debt and the urgent need for funding ante the social demands.
Although the negotiations have begun since the organization paid $ 389 million in April of this year in the wake of the pandemic, it has intensified in recent months, estimated by the official of the official party, New Ideas, to receive the Qualified Mayor of the Legislative Assembly in the next elections.
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On January 27, the Director of the Department of Occupational Hemisphere Department of the IMF, Alejandro Werner, confirmed – a group of inversionists in a private virtual meeting that has held active meetings with the governor salvadorone to counter a program of elections.
One day after the statements of Werner, the Emergency Mercury Bonus Indicator (EMBI for its English signals) not 7.5 points and 6.62 points, then the inverters would interpret that there are many probabilities of being a company.
A few months ago the huge country was elevated to a 11 point difference spread over the entire endowment and the difficult endowment between the Executive and the Legislature.
Financial services consultants such as Amherst Pierpoint were asked in their analysis that El Salvador would be the closest country in the region to take over a financial program with this body, in view of which the Costa Rican and Panama neighbors had recently learned. Costa Rica is $ 1,700 million and Panama is $ 2700 million.
Without embarrassment, the conversations take place with very low profile in the hope of the election results.
And if an agreement is reached with the IMF, it will assume a series of tax compromises, many of which will not be popular among the population, starting with its main requirement: submitting the Impairment to the Valuation Unit (IVA) and following the application pre-emptive tax and the implementation of guest content measures, including the reduction of public employees.
In Costa Rica it is part of the recipe that the country should follow in the footsteps of the letter to keep the funds that the IMF will have if the Congress approves it.
The only announcement of an agreement with the IMF in October 2020 provoked in Costa Rica three consecutive protests between the population could raise an increase in taxes in the midst of the economic crisis during the pandemic.
In Costa Rica, the public protested against the announcement of the agreement with the IMF.
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Acuerdo in 2009
But this is not the first time that El Salvador has reached an agreement with the Monetary Fund. In 2009, he assisted a $ 800 million program, albeit el dinero nunca fue desembolsado.
To take this money, the IMF will pay a tax adjustment of 3% of GDP and in order to increase the IVA proposal, apply a pre-emptive tax and increase the impact of the tax recovery.
After thirty years of evaluation, the IMF suspended the agreement that the country had all the required taxes.
In 2009, the cayo’s economy paid -3% to the 2008 United States financial crisis, which affected the global level. The agreement with the IMF was a financial response that would allow access to other prestigious internationalities.
This is the country’s debt that does not exceed 60% of GDP and the tax deficit is 3%. The organization’s requirement in this opportunity is to make an adjustment of 3% of GDP to stabilize its finances.
However, this scenario is different: a prolonged quarantine to avoid COVID-19 contagions is estimated that the salvadoran economy will have a 9% increase in GDP and will be the most affected in the Central American region.
The debt accumulated in the last few years, which is an accelerated collocation of more debt required in 2020 by the Bukele governor, has risen to 90% of the total debt of the country.
Moreover, the fiscal deficit exceeds 10.5% of GDP, the highest in Central America.
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Required program
The economist Luis Membreño says that to conclude a program with the IMF, if it is obtained by a majority of the official party in the Legislative Assembly, it is not necessary that it be allowed that the Government establishes obligations to complete and also supervise of an international organization. “The agreement must be reached because it will allow tax objectives to be met and the IMF will be supervised,” he said.
The same recommends the Salvadoran Foundation for the Economic and Social Development (Fusades) which also planted the need for an external body to constantly evaluate the compliment of fiscal metrics.
Member states, in addition, that in contrast to the requirements that the IMF solicited in the country in 2009, this time it will be flexing its requirements to bring a new reality to the pandemic.
What are the conditions that have to be followed to access its funds?
Acceding to an agreement with the IMF, more than a benefit, is a strict fiscal compromise that implies a series of mediates that, on many occasions, do not become popular among the population. This collection summarizes some of the media he has spoken to in El Salvador and others he has recently spoken in Costa Rica, the last country in the region to have agreed on a program with them. The “receipts” are different depending on the fiscal reality that each country has.
Increase in taxes
The IMF has been pushing for an increase in the number of entrants since then, as one of the main pillars to increase public finances. In 2009, with the first Stand-by agreement, the organism suggested an increase in IVA.
It is also proposed to apply a tax deduction that applies to properties.
Recently, while approving a $ 389 million loan, I highly recommend that the IVA countries increase and tax incentives between 2021 and 2024.
In Costa Rica it is immediately proposed to apply taxes to the Lottery premiums and the application of taxes to credit unions as well as an increase in interest taxes.
The country needs to make an adjustment of 5% of its GDP to reach 50% of the debt level by 2035.
Reduction of public employees
In agreement with Costa Rica, the body has suggested that an adjustment be made to reduce employment in the public sector and with it to stop a gap in the disbursement of public finances.
In El Salvador, the latest statistics from the Salvador Institute of Social Security (ISSS) show an increase of 3.8% in the number of public employees.
Elimination of tax exemptions
The IMF also suggests that it eliminates fiscal exemptions for companies and sectors in general with the end of more tax cuts.
Efficiency in recovery
Another of the compromises that the Foundation will plant in the countries with which to establish an agreement is that increase the efficiency in the recovery of ingress. This training tends to have more controls and an effective prevention plan that allows for better results.
Conditions prevail in agreement
“When a country obtains credit from the IMF, the governor compromises to adjust economic policy to overcome the problems that must apply for financial assistance to the international community,” the IMF said.
For these countries should start commenting on the mediates since the FMI dismantled the diner.
Posteriorly the organism follows periodic evaluations to ensure that the species is complementary to the indications.
The money of the agreement, in addition, was not entered into by a single party that agreed to the agreement in the years in which the aid program was agreed.