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El Salvador Loses Access to $785 Million in IMF Funds

Article Summary:

The IMF has temporarily suspended the availability of emergency funds valued at $785 million for El Salvador because it has not met agreed targets, having exceeded government spending.

Photo Credit: La Prensa Grafica

Original Article Text From La Prensa Grafica via Google Translate :

IMF Suspends Loan Agreement with the Country

El Salvador temporarily lost the right to receive an emergency loan from the International Monetary Fund (IMF), as confirmed by a holder of the Economic Cabinet.

Carlos Acevedo, president of Banco Central de Reserva (BCR) said in a meeting with the IMF in Washington last week, they were informed that the country can not go to $ 750 million had been approved as a precautionary loan (SBA) for an indefinite time.

“If El Salvador had a need for emergency liquidity in the financial system … could not be accessed funds, “said the head of BCR.

The reason is that not met the targets for public spending, but exceeded. The balance of public finances was one of the requirements to maintain for three years the SBA.

“You can not access resources, but not the agreement is broken,” said Acevedo. Would definitely broken if so decided by the board of the fund. “It’s like ‘switch-off’ is off,” he said.

Meeting in the United States
In Washington, the Economic Cabinet discussed with IMF representatives in different ways to save on government spending to compensate for the breach of 2011.

This proposal will “waive” or give a new opportunity. “As are the fiscal targets, it is very difficult for them to go to the directory and request a waiver of the breach,” the president of the BCR.

The Government closed with a balance of $ 906 million deficit, that is, expenditures exceeded by more than $ 900 million in revenue at the end of 2011. It’s $ 200 million more than expected.

“It was agreed that he would find a way to build a cost containment plan or adjustment necessary,” said Acevedo, although progress in some of the ideas in analysis.

“We discussed a bit the issue of subsidies,” he said, because they represent significant burdens on the Government cash availability and only in 2011 accounted for nearly $ 400 million. “There was more about containment of other current expenditure is not subsidized,” the official said also, because as current expenditures include salaries, travel and per diem expenses, purchase of vehicles, fuel and other services.

The first action to be taken together with representatives of the IMF is developing a new schedule of compliance that is more flexible compared to the difficulties of the Treasury. “Basically it would renegotiate the compliance program goals to take the board,” said Acevedo also.

Fund’s board has not given a date to answer.
El Salvador signed a second agreement with the IMF for 36 months in March 2010, amounting to $ 785 million (equivalent to 300% of its quota in the background) and it replaced another that was signed in January 2009 , which was in force for 15 months.

Link to Original Article:

From La Prensa Grafica

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