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El Salvador: IMF intervention

Tuesday, April 16, 2013

The International Monetary Fund has issued an unusual recommendation to El Salvador, advising the leading political parties to initiate a national dialogue.

The aim is to keep El Salvador's fragile economy as stable as possible during presidential elections slated for next March, and during the subsequent transition to a new administration.

The IMF doesn't usually make political recommendations. But El Salvador is a special case.

For several years, the economy of El Salvador has had the lowest rate of growth in Central America, including an anemic 1.5 percent in 2012.

Foreign debt is $1,953 per person, the highest in the region except for Panama, which – given an average annual rate of growth of gross domestic product during the last five years of close to 10% - is likely to pay what it owes.

The Fund, which has proposed a fiscal deficit of 2 percent of GDP, wants to ensure that no big-spending politician can be allowed to exceed this limit.

Under the stewardship of President Mauricio Funes, many of the political wounds of El Salvador's civil war appear to be healing.

The worst thing that could happen is that violence due to poverty, could once again increase, as a result of the nation's economic problems.