Wednesday, 23 February 2022 03:06

El Salvador does not have the funds to cover its financial commitments 2022-2023: ICEFI

Written by Evelyn Alas

The executive director of the Instituto Centroamericano de Estudios Fiscales (ICEFI), Ricardo Castaneda Ancheta, said in a radio interview, that the Central Government does not have the money to honor its commitments in 2022 and particularly in 2023, because US$800 million Eurobonds are due in january.

He also expressed that El Salvador issued in 2021 more than US$2 billion through bonds in Treasury Bills (LETES) and Treasury Certificates (CETES), causing pressure on the country's public finances and this year they have to pay more than US$3 billion along with other debts that are pending.

He pointed out that if Bitcoin bonds work, it will allow less control mechanisms demanded, for example, by the International Monetary Fund (IMF), he asks for scenarios of respect for the Rule of Law, Governance, liquidity, good control and respect for the laws.

He also stated that there is a possibility of reducing El Salvador's credit risk level, depending on the actions and commitments adopted, for example, by guaranteeing legal certainty and removing the Bitcoin as legal tender.

But he said that if El Salvador goes out now to issue bonds it would have to pay an interest rate of 17% or 18% in the event that any multilateral institution lends to it.

Ancheta affirmed that every year, according to the Ministry of Finance, El Salvador loses US$900 million, because they have allowed many tax incentives for foreign investment and so far they have not shown that these incentives generated employment or any benefit.

He said that it is advisable that the tax incentives are momentary, because it is while the company is developing, and until it develops, they have to be staggered and then reduced.