Debt statistics 2015
|Overall international debt burden (% of GDP)||66|
|Government payments on foreign debt (% of revenue)||17.7|
|Government foreign debt (% of GDP)||31|
|Private foreign debt (% of GDP)||18|
|IMF and World Bank debt cancellation ($ billions)||0|
|Country case studies||Yes|
Country case study
El Salvador’s debt originated under the military governments of the 1970s, and particularly the US backed junta in the 1980s. The debt increased from $100 million in 1971 to $500 million by 1979.
In 1979 a military junta took power backed by the United States. The Salvadorian civil war ensued in which an unknown number of people were disappeared and 75,000 killed, including Archbishop Óscar Romero. Throughout this time, the junta were supported with extensive loans. Between 1979 and the end of civil war in 1992, the debt increased from $500 million to $2.2 billion. During this period, half of lending was from foreign governments, primarily the United States. A third was from international institutions, the vast majority of which was from the Inter-American Development Bank, IMF and World Bank.
At the end of the war, government foreign debt payments were over 20 per cent of exports. Through the 1990s the debt was stable, but shot-up at the turn of the millennium when El Salvador switched to the dollar (unusually choosing to do so, rather than being forced into it by hyperinflation). The global financial crisis further weakened El Salvador’s economic situation, with the country entering recession in 2009.
El Salvador has not been eligible for international debt relief schemes because it is ‘too rich’, with a national income per person of $4,200 (£2,800). However, 12 per cent of the population are malnourished, up from 9 per cent at the turn of the millennium. The World Bank says 17 per cent of the population live on less than $2 a day, barely down from 19 per cent in 1995.
El Salvador’s government external debt is now 28 per cent of GDP, around $7 billion. Government reserves have been used to help meet high debt payments over recent years, being depleted by $400 million a year, to $2.1 billion in 2011.
The government spent $970 million (24 per cent of government revenue) on external debt payments in 2011. Between 2011 and 2013, El Salvador has had an agreement to borrow up to $800 million from the IMF, though has not actually taken any of the money. In negotiations on any similar programme, the IMF wants all political parties to agree on economic policies so that they will not change following the elections. El Salvador is due to hold Presidential elections in 2014, and parliamentary elections in 2015.