The Executive Board of the International Monetary Board recently completed consultations with the government in El Salvador and published these economic statistics:
[The Salvadoran] economy has strengthened. Growth has picked up and is running at 3 ½ percent thus far in 2006 (2 percent per year in 2000-05), spurred by investment and exports. Despite the full pass-through of higher oil prices, year-on-year inflation fell to 3 ½ percent in May 2006, the lowest level in the region. The external current account deficit widened slightly to 4Â½ percent of GDP in 2005. Sovereign spreads have remained among the lowest in the Latin America region.
Fiscal policy has aimed at stabilizing the public debt/GDP ratio and strengthening debt management. The 2006 budget limits the deficit to 3 percent of GDP, which implies a primary deficit of some 0.7 percent and will maintain public debt at around 42 percent of GDP, with the nonfinancial public sector debt at 40 percent. Tax revenue has been strengthened by tax measures approved in late 2004/early 2005, as well as recent efforts to broaden the taxpayer base. As budgeted, this revenue gain is largely offset by higher energy subsidies, wages, interest, and pension outlays. The increase in capital spending achieved in 2005 has been maintained in the 2006 budget.
The IMF is generally complementary of the pro-business policies of the ARENA government. Noticeably absent is any mention of plans by the government to make any significant improvement in spending on health, education, or poverty reduction. Also absent is any discussion of the great disparity in distribution of the economic wealth behind these statistics.