IDB approves loan to address the COVID-19 pandemic in El Salvador

A budget support loan of $250 million will help finance the country's efforts to tackle the health and economic effects of the COVID-19 pandemic

The Inter-American Development Bank (IDB) approved a loan of $250 million for El Salvador, under the Special Financing for Development modality, which will be used to finance measures to contain the health crisis, mitigate its impact on vulnerable households, and promoting countercyclical policies that reduce their effect on the economy and mitigate the drop in short-term tax revenues.

The loan also includes commitments from the authorities to reduce the fiscal deficit, focus public investment on areas of high relevance for economic recovery and maintain a competitive and transparent economy once the health emergency is overcome.

Given the economic impact of the pandemic, El Salvador is executing a set of measures with the objective to assist individuals and legal entities, directly affected by the emergency. These measures include the temporary suspension of payment for services such as drinking water, electricity, and telecommunications; a transfer of $300 to almost 1.5 million vulnerable families who lost their source of income; a monthly bonus of $150 to essential public employees; and extending the 2019 tax payment deadline for several types of taxpayers.

The effects of the pandemic on public finances, particularly the significant amount of indebtedness required to meet the emergency, will require decisive measures in the medium term to protect macroeconomic stability, so this credit is also based on the government's commitment to implement measures in the medium term aimed at reducing public debt in line with the Fiscal Responsibility Law.

The IDB is actively coordinating with other financing agencies that contribute to the Emergency Fund, Recovery and Economic Reconstruction (FERRE) that the country has established to face the crisis caused by the pandemic and its economic and social consequences.

The $250 million IDB loan is for a seven-year term, a three-year grace period and an interest rate based on LIBOR.