El Salvador: Request for Extended Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for El Salvador

REQUEST FOR EXTENDED ARRANGEMENT UNDER THEEXTENDED FUNDFACILITY—PRESS RELEASE;STAFFREPORT;STAFFSTATEMENT;AND STATEMENT BY THEEXECUTIVE DIRECTOR FOREL SALVADOR In the context of theRequest for Extended Arrangement Under the Extended Fund Facility,the following documents have been released and are included in this package: •APress Releaseincluding a statement by the Chair of the Executive Board. •TheStaff Reportprepared by a staff team of the IMF for the Executive Board’sconsideration onFebruary 26, 2025, following discussions that ended onDecember14, 2024, with the officials ofEl Salvadoron economic developments andpolicies underpinning the IMF arrangement under theExtended Fund Facility. Basedon information available at the time of these discussions, the staff report wascompleted onFebruary 12, 2025. •AStaffStatementupdating information on recent developments. •AStatement by the Executive DirectorforEl Salvador. TheIMF’s transparency policy allows for the deletion of market-sensitive information andpremature disclosure of the authorities’ policy intentions in published staff reports andother documents. Copies of this report are available to the public from International Monetary Fund•Publication ServicesPO Box 92780•Washington, D.C. 20090Telephone: (202) 623-7430•Fax: (202) 623-7201E-mail:publications@imf.org Web:http://www.imf.org International Monetary FundWashington, D.C. IMF Executive Board Approves New 40-month US$1.4 billionExtended Fund Facility Arrangement for El Salvador FOR IMMEDIATE RELEASE •The IMF Executive Board approved a new 40-month arrangement under the ExtendedFund Facility (EFF) for El Salvador, with access equivalent to US$1.4 billion. The Board’sdecision allows the authorities an immediate disbursement equivalent to around US$113million. •The IMF-supported program aims to ensure conditions are in place to boost El Salvador’sgrowth prospects and resilience by strengthening public finances, rebuilding external andfinancial buffers, and improving governance and transparency. Bitcoin risks are also beingaddressed. Washington, DC – February 26, 2025:Today the Executive Board of the InternationalMonetary Fund (IMF) approved a 40-month extended arrangement under the Extended FundFacility (EFF) for El Salvador, with access of SDR 1033.92 million (around US$1.4 billion, or360 percent of quota). The Board’s approval allows the authorities an immediate disbursementof SDR 86.16 million, equivalent to around US$113 million. The arrangement is expected tocatalyze additional multilateral financial support, for a combined overall financing package ofover US$3.5 billion over the program period. Building on recent progress, the authorities’ IMF-supported program aims at addressingmacroeconomic imbalances and strengthening governance and transparency, with theobjective of boosting El Salvador’s growth prospects and resilience. Under the program, theprimary balance will improve by 3½ percent of GDP over three years, underpinned initially bya rationalization of the wage bill, while protecting priority social and infrastructure spending.This will be complemented by measures to rebuild reserve buffers and bolster financialstability, as well as actions to strengthen fiscal transparency and anti-corruption and Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) frameworks. Theprogram also addresses risks arising from the Bitcoin project, including by making acceptanceof Bitcoin voluntary and by confining public sector engagement in Bitcoin-related activities andtransactions in and purchases of Bitcoins. Following the Executive Board’s discussion on El Salvador, Mr. Nigel Clarke, DeputyManaging Director and Acting Chair, issued the following statement: ``The Salvadorean economy is steadily expanding on the back of robust remittances andtourism, and a greatly improved security situation. External deficits have narrowed, inflationhas fallen, and recent liability management operations have reduced near-term financingneeds. Nevertheless, El Salvador continues to face deep macroeconomic imbalances,stemming from high debt and weak external and financial buffers, as well as barriers toinvestment and productivity. The authorities’ economic program, supported by an ExtendedFund Facility arrangement, aims to strengthen fiscal and external sustainability while creatingthe conditions for stronger and more inclusive growth. ``The Fund-supported program is underpinned by an ambitious growth-friendly fiscalconsolidation, aiming to put public debt on a firm downward path and building fiscal buffers.The consolidation is being supported by raising public spending efficiency and reforms of thecivil service and the pension system over time, while providing sufficient space to protectpriority social and infrastructure spending. ``The program will enhance El Salvador’s resilience to shocks, through a gradual anddetermined strengthening of external and financial sector buffers. A plan to incre