IADB Loan Approved

The Inter-American Development Bank approved on February 19 a US$200mn loan to finance a programme aimed at improving El Salvador's public finances. The programme will come as a welcome boost to the government, which saw its fiscal deficit (excluding donations) slip to 4.1% of GDP in 2009, from 1.3% in 2008. However, we caution that the agreement is set to force politically unpalatable decisions on the government of President Mauricio Funes, with measures to reform taxation, reduce subsidies and increase the transparency of public finances likely to place downside pressure on his popularity.

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