An International Monetary Fund (IMF) staff team has reached a staff-level agreement with El Salvador on a 40-month extended arrangement under the Extended Fund Facility (EFF). The agreement, which amounts to approximately US$ 1.4 billion, aims to address balance of payment needs and support economic reforms in the country. This was announced following discussions held in San Salvador from December 5-14, 2024.
The IMF team was led by Luis Cubeddu, Deputy Director of the Western Hemisphere Department, and Raphael Espinoza, Mission Chief for El Salvador. In their statement, they highlighted that "the agreement is subject to approval by the IMF’s Executive Board and contingent on the implementation of the agreed prior actions."
Additionally, it is anticipated that this program will attract further financial support from international bodies such as the World Bank and regional development banks like CABEI and CAF. Together with these institutions, an overall financing package exceeding US$ 3.5 billion is expected over the program period.
The statement noted positive developments in El Salvador's economy post-pandemic due to strong remittances and increased tourism amid improved security conditions. Climate shocks have had only temporary negative effects while inflation has decreased further thanks to lower global commodity prices.
"Building on this progress," said Cubeddu and Espinoza, "and recognizing El Salvador’s pending macroeconomic and structural challenges," the program seeks to enhance fiscal and external stability while fostering stronger inclusive growth.
IMF staff expressed gratitude towards Salvadorean authorities for their cooperation during discussions about economic reform programs aimed at improving prosperity in El Salvador. The IMF Board is expected to review this program for approval by early February once all prior actions are implemented.