One is that in September and October you will need $ 400 million each month to be able to meet all of your payment commitments.
An analysis by the Economic Department of FUSADES (Salvadoran Foundation for Economic and Social Development) indicates that the Government is in financial difficulties to conclude this year and be able to pay all its obligations, so specialists suggest “correct macroeconomic conditions” to be able to meet payments.
“The government of El Salvador faces short-term and long-term vulnerabilities due to high funding needs,” it says in the report they have released that day and in which they raise three short-term scenarios.
1. First scenario:
“In the short term – from July to December 2021 – it is estimated that the government will have a funding gap of $ 1,846.9 million, noting that in three months – from August to October – it will need funding of $ 400 million each month to be able to meet all obligations, mainly to cover short-term domestic debts of $ 865 million (mainly owned by banks in the financial system), and the increase in the fiscal deficit that involves the implementation of the Bitcoin Law ($ 225,300 .000), support for small businesses to sustain the 20% increase in the minimum wage, increases in the liquefied gas subsidy and distribution of food baskets “, warn economists of FUSADES.
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Therefore, they indicate that to cover the financing needs of the second half of this year, one of the first scenarios is to consolidate the agreement with the International Monetary Fund (IMF), and for this they launch a suggestion.
“The best scenario will be to change the course of fiscal policy towards a path of sustainability, which can be achieved by reaching an extended service agreement with the International Monetary Fund (IMF), acquiring the commitment to channel public debt to a reasonable target of 60% of GDP in the medium term.This scenario would provide sufficient financing at favorable interest rates for the country, both the IMF and other multilaterals – the World Bank and the IDB – but more importantly, it would give credibility and confidence in the short and medium term, enabling a better climate for investment and for the development of the country, “say the specialists.
2. Second scenario:
Another possibility that economists see is that the government will reduce its funding gap through loans already approved by the Legislature and others in the process of incorporating the budget: two from the Central American Integration Bank Economic (BCIE), one for $ 600 million and another for $ 50 million; in addition to a third of the World Bank for $ 50 million.
“However, this still leaves a funding gap of $ 1,146.9 million; of that amount, $ 865 million would be used to pay for Treasury Certificates (Cetes), or bridge credit, which were acquired under the concept that they were “tied” to obtaining loans already authorized, but this is not being met, because instead of using the loans to pay off the bridge credit, they are being used to increase the budget, so the question remains as to how these Cetes will be paid, “he says in the analysis.
One aspect that FUSADES economists highlight is that the government “without any explanation to the public” called for an early redemption of $ 645.8 million from Cetes expiring on September 23, 2021, through a new calendar, but without make reference to which loan they correspond to, since to the being credit bridge they had to be paid with the loan that justified its emission.
Faced with this, the scenario they see is that “Cetes or another domestic debt instrument will be issued to finance the maturity of debt that is being paid in advance, assuming that there are internally investors interested in buying these securities. ‘investment’.
In that case, experts say, it would still need $ 281.9 million to close the 2021 financial gap and meet all obligations acquired in that same year. “This sum could be closed through various sources, such as government deposits in the financial system, which on August 13, 2021 reached $ 1,561.3 million, or other” drawers “known only to officials of as well as issues of new domestic or international debt, ”they consider.
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3. Third scenario:
And finally, economists indicate that another scenario in the short term would be the most critical although less likely to occur.
“It’s that the government doesn’t get the resources to pay off its commitments for the rest of the year, it falls into a debt default, and a chain reaction is activated that is entrusted to the financial sector, and that “The country is sinking into a deep economic and social crisis. The probability of this scenario is lower than in the previous scenario, at least for the time being,” they warn.
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