Central America: El Salvador taps IDB
Mauricio Funes, the newly elected president of El Salvador, is likely to tap IMF, IDB and World Bank sources to help his country navigate the economic slowdown. Last month the El Salvadorian central bank received $187 million of a $400 million three-year loan from the IDB that was signed in December.
"The need for external financing has been growing as the crisis advances, which is why maintaining an open window with multilaterals is so important," says Alejandro Grisanti, a Barclays Capital analyst. "There is a very fluent relationship between El Salvador and the development banks."
Funes, who was sworn in on June 1, will be compelled to adjust the 2009 budget to bring it in line with the new reality. The outgoing president, Antonio Saca, had a 2009 budget that included an extra $3.6 billion, based on higher growth rates for the year. Initially growth predictions were at 4%, now official figures expect 0.5% and the IMF expects flat growth. One explanation for the adjusted growth forecast is the 7.5% year-on-year decline in first-quarter remittances.
The slowdown meant that fiscal revenues fell by 13.8% by early March 2009, according to the central bank.