CABEI director says El Salvador has improved its debt trajectory, but that’s not true

El Salvador’s current administrator lied to CABEI and former Finance Minister Alejandro Zelaya on Tuesday during the TV interview “Frente a Frente” when he asserted that the Salvadoran government’s debt trajectory had improved by “flattening the repayment curve.

But the opposite happened: in April of this year alone, Nayib Bukele’s administration issued $1 billion in bonds (of which it received only $908 million) with an interest rate of 12%. Part of this money was used to buy back Eurobonds for 2025, 2027 and 2029, which have an interest rate of around 6%. Old debts are paid off with new but expensive debt, as if the citizen had decided to cancel his mortgage with a credit card.

“The global process has translated into higher average interest rates on Eurobonds. This, amidst the lack of clarity on fiscal adjustment, is reinforcing concerns about debt sustainability,” Barclays investment bank said in a report titled “Kicking the can but up the hill steeper.”

The interest rate on these instruments has reached the average, thanks to the adjustment made by the Salvadoran government to 8%, and for this reason it is barely lower than that of short-term debt purchased from local banks, which is usually called “short-term debt.” “State credit card.”

“By easing the repayment curve, and by getting cheaper rates, we can allocate additional funds to carry out the work,” Zelaya said.

However, according to forecasts by the English bank Barclays, in the next five years (2024-2029), El Salvador will have to allocate an estimated $ 2,000 million annually just to pay the interest resulting from the debts contracted in recent years. To get an idea of ​​​​its size, it is necessary to take into account that the entire budget of the Ministry of Health for 2024 amounted to $ 1,261.7 million.

Read more: The government’s largest multilateral financier, CABEI, turns off the tap

Zelaya was in at least one other television interview this week, where, in addition to talking about CABEI-funded projects in El Salvador, he asserted that local media lied when they made Echo of statements From the Executive Director of the entity, Gisela Sanchez, that the tap on El Salvador from the multilateral ones will be closed, which she explained with the news of the approval of new funds for FOVIAL and that the official visited Nayib Bukele.

Manfredo Marroquín, of Acción Ciudadana (the Guatemalan branch of Transparency International), believes that Sánchez has had to backtrack on his intentions to improve practices within the entity, especially with regard to correcting what his Honduran predecessor, Dante Musi, nicknamed the “dictator banker,” did.

“CABEI did not meet the minimum standards, not even on the issue of balance in the delivery of funds. Guatemala was the country that received the lowest percentage under Dante Musi (barely 6% of the total), while it had the same right as El Salvador or Nicaragua. “The president is right to make this decision,” Marroquín commented.

“The governments of Costa Rica and Guatemala should support this,” the Guatemalan activist said.

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