New Loan Packages for El Salvador

During the recent Summit of the Central American Integration System (SICA) in San Salvador, the World Bank and Inter-American Development Bank announced new loan packages for El Salvador.

On Monday, the World Bank announced that it would finance three loans to El Salvador, totaling $230 million.  (For more on the series of World Bank loans, see the World Bank announcement, the FINANCIAL or elsalvador.com.)  The loans are intended to help El Salvador’s economic recovery from the global financial crisis and provide support to municipal governments.  El Salvador has been particularly hard-hit by the global recession, and in 2009 saw the first full-year contraction of GDP in two decades.  Robert B. Zoellick, the President of the World Bank, said, “this package is designed to help the poor of El Salvador, and I look forward to its speedy and effective implementation.”  The three loans include $100 million for income protection, health services, and supporting the country’s economic recovery, while $50 million to be funneled through the Programa de Apoyo Temporal al Ingreso (PATI) to low-income families for participation in community activities and training programs.  Another $80 million will be distributed to local governments, to ensure they are able to provide basic services to their communities.

The loans are part of a $650 million loan package planned for the 2010-2012 Country Partnership with El Salvador.  The Salvadoran Legislative Assembly must ratify the loan package before it becomes official.  Ratification, however, is not guaranteed. In the past five years, the Legislative Assembly has rejected at least five loan agreements from the World Bank. In recent years, such loan packages have received great criticism for increasing national debts, which eventually requires that governments cut services such as health care and education (for more, click here and here).

In addition to the World Bank package, the Inter American Development Bank announced a 25-year for El Salvador worth $60 million that will improve public health services. El Salvador suffers from high incidences of chronic and poverty-related diseases and the loan is intended to alleviate some of the strain that these diseases place on the health care system. The loan will fund infrastructure and technology projects to modernize and improve the network of health centers, as well as cover staff salaries.  The Salvadoran government has pledged to contribute an additional $22.7 million towards the projects (for more the complete story visit La prensa gráfica).

During the summit, Central American country representatives discussed the increasing violence throughout the region, focusing on five key topics: security, social policy, climate change and natural disaster prevention, economic integration, and regional institutionalism.  (To read more about the SICA summit, visit La tribuna.)

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