The Salvadoran Banking Association (ABANSA) reported Thursday, August 24, that it had submitted a proposal to the Salvadoran Ministry of Finance to modify the structure of local debt issuance. Currently, short-term debt is limited to terms of no more than 365 days.
The banks have proposed a structure of local issuances with terms of 2, 3, 5, and 7 years that will reduce the levels of short-term public debt and obtain a better maturity profile of El Salvador’s financial obligations in the medium term.
Salvadoran banking association ABANSA.
ABANSA proposed a structure of local issuances with terms of 2, 3, 5, and 7 years; this will reduce the levels of short-term public debt and obtain a better maturity profile of El Salvador’s financial obligations.
“This proposal aims to support the country’s efforts to improve its debt profile, reduce the country risk perceived by international markets, and achieve a framework of fiscal stability in the medium term,” noted the association.
This proposal occurs in the context of a substantial improvement in financial country risk indicators, such as the EMBI of El Salvador, as a result of the advance and punctual payment of Eurobonds 2023 and 2025, the strength of the post-COVID Salvadoran financial system and the confidence of the country’s financial institutions in the performance of the Salvadoran economy.
Salvadoran banking association ABANSA.
Short-term debt is debt issued with terms not exceeding 365 days. Local banks have been buying from the Government debt to finance state spending at an average rate of 7%.
SEE ALSO: El Salvador exports
The banks participating in the proposal explained that this structure does not entail an increase in public debt investments.
The Salvadoran Banking Association stated: “The private banks of El Salvador have confirmed that they will actively participate in this emission program of the country.”
SEE ALSO: Remittances to El Salvador
Some economists have commented that this proposal is more about the pressure the Salvadoran government has to cancel what it owes to the banks; according to them, the country lacks the money to pay these obligations.
