By Anthony Esposito and Nelson Renteria
(Reuters) – El Salvador in talks with International Monetary Fund (IMF) about securing about $ 1.3 billion in funding, sees “golden opportunity” to revitalize its economy after party victory in power in parliamentary elections, a senior government official said.
Finance Minister Alejandro Zelaya told Reuters in an interview that El Salvador is keen to secure an IMF-approved 36-month extended financing facility, similar to the program announced this week for fellow Central American Costa Rica.
“This will help us take advantage of the budget gaps for 2021, 2022 and 2023” and reduce the high costs associated with El Salvador’s debt, Zelaya said.
El Salvador’s dollar sovereign bonds surged on Tuesday after President Nayib Bukele declared a landslide victory in Sunday’s vote, saying his party and allies won the largest majority in the country’s history.
“What (the ruling party) New Ideas and President Bukele achieved on Sunday is truly a golden opportunity for El Salvador’s economy to take off,” Zelaya said.
Fitch Ratings said the outcome of the legislative elections ended the political deadlock that had hampered policy implementation and hampered El Salvador’s ability to leverage external funding.
This deadlock has led to over-reliance on domestic borrowing to meet the government’s high financing needs, pushing up borrowing costs, the rating agency said.
Zelaya said funding from international multilateral lenders should make El Salvador’s debt and public spending sustainable. For 2021 “we need funding of around $ 2 billion, including the short-term debt management plan,” he added.
A comprehensive reform of El Salvador’s pension system was needed so that pensions did not put pressure on public finances, Zelaya said.
Although no deal has been reached, the IMF could disburse up to $ 450 million this year, in addition to previous commitments of $ 250 million from the Inter-American Development Bank, $ 200 million from the World Bank. and $ 600 million from the Central American Bank for Economic Integration, he said.
When asked when the IMF deal could be finalized, Zelaya said it was still too early to say.
“We are working to come to an agreement. It takes two.”
(Reporting by Anthony Esposito in Mexico City and Nelson Renteria in San Salvador; editing by Grant McCool)
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