Barclays warned of difficulties with the IMF and recommended that El Salvador sell bonds.

Investment bank Barclays warned that El Salvador’s current financial conditions will not allow an agreement with the International Monetary Fund (IMF) in the short term, which is why it recommends selling bonds maturing in 2029. In a market analysis, titled “El Salvador: Weak fiscal results and weak prospects for the IMF”, the Bank reassessed the likelihood that Nayib Bukele’s government will at least extend the financial assistance program with funds “not at value levels”. Will reach. With the explicit expression “without the IMF”, Barclays has recommended that the Salvadoran government sell bonds due 2029, consisting of $601.1 million at a coupon of 8.62%. In addition, it proposes to convert 2052 notes into $1,000 million with interest rates. of 9.5% with a maturity of 7.1% in 2050. In October 2023, the President committed to consolidate Agreement with IMF after 2024 elections And assured that, up to that moment, there had been “productive conversations”. This is the second attempt by his Bukele administration to obtain the financing program, after negotiations did not proceed in 2021 due to the dismissal of the Supreme Court judges. The Court of Justice and Bitcoin Adoption.

“Fiscal slip.”

Barclays points out that fiscal outcomes were “going well” until November 2023, but “slipped” given the election calendar in December. The Bank reminds that the capital markets are not yet open for the return of El Salvador, which has not granted a loan since July 2020. The document recalls that Bukele traveled to Washington last week to attend the Conservative Political Action Conference (CPAC). Criticize globalism,” but not to meet the IMF. “Although El Salvador’s commitment to the IMF program remains elusive, fiscal transparency has deteriorated and local pension funds continue to provide financing to the government”, the bank said. indicated in its report. Barclays said that the government’s fiscal capacity to obtain new resources from other multilateral institutions has been reduced, while options in the local market are limited. At the moment, the fiscal deficit is expected to exceed the gross domestic product (GDP) for 2024. ) is stable at 1.8%, but the trajectory of public debt rises with “concern” to 83.1% of GDP – which also includes pension commitments – Meanwhile, government deposits in the banking system in the run-up to the elections are up by $667 million grew to $583 million. Furthermore, the financial company anticipates an economic recession for 2024, which will compromise tax revenues, so it is expected that the executive will use capital spending as an “economic engine”.

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