The government reports that public debt exceeded $20,820.42 million last June, while pension obligations total $10.116 million.
Total public debt, including obligations arising from pension funds, exceeded the$30,956.8 million last June, statistics from the Central Reserve Bank (BCR) indicate.
Until February 2023, the BCR and the Ministry of Finance included the pension system’s obligations within the total public debt, but with the last social security reform the balance is published in an independent series.
Currently, total public debt includes the obligations of the central government, non-financial public companies and the financial public sector (Central Bank). These commitments exceeded the$20,840.42 millionlast June.
Meanwhile, pension obligations amounted to$10,116.43 million.
Therefore, the commitments under the responsibility of the government represent $30,965.85 million, equivalent to 86.6 percent compared to the Gross Domestic Product (GDP) projected for 2024, at $35,736.7.7 million.
According to the BCR, total public debt without pensions experienced an annual growth of $1,292.39 million from $19,548.03 million in June 2023. The forecast balance, meanwhile, rose $1,263.68 compared to $8,852.75 million in the same month a year ago.
- Total public debt (without pensions) as of June 2024: $20,840.42 million
- Pensions related debt to June 2024: $10,116.43 million
Chronicle of changes in debt structure
Pensions:
In the last year, the debt structure has undergone several modifications, both in maturity and interest periods.
In 2023, a new comprehensive pension system law came into force, incorporating several changes. First, a Salvadoran Pension Institute (ISP) was created, which has the power to issue Certificates of Forecasting Forecast Obligations (COP), which replace the Social Investment Certificates (CIPs), created in 2006 to pay public pensions (INPEP and UPISS).
In this way, the IPS began issuing the COPs, which is basically new debt to pension fund managers (AFP). The Central Bank reports that the balance of these certificates reached $1,720.15 million in June, with an annual growth of $1.264 million compared to the same month in 2023.
The law also established the Transitional Financing Certificates (CFT), a new previously issued debt structure, which holds a balance at $8,396.28 million. In April 2023, the IPS and the AFP agreed to a restructuring of the security obligations, in whichthe government does not deprecia bet capital or interest for four yearsin exchange for an increase in the interest rate to 7 % (before 4.5 and 6 %) and a 50-year maturity extension (before 24 and 44 years).
Floating debt
Born in the cradle of private banking, the Ministry of Finance accepted a proposal to change the profile of securities in the hands of the bank. The process began in September 2023 and covers 54 per cent of the commitments issued in Certificates and Letters of the Treasury (Cetes and Letes).
The Letes are known as the government’s credit card – basically allow the Treasury to issue debt in the domestic market to temporary needs of the tax fund, but they became a constant financing mechanism. They are mostly acquired by banks and AFPs. The Cetes, on the other hand, are more like a bridge credit, which are also placed in the local square.
Theplan includes $1.5 billion, which will go from a maximum maturity year to periods of one to seven years, in exchange for the interest rate to increase from 8.5 per cent to 8.83 %.
This restructuring will soften pressure on payment maturities and is expected to be completed next September.
Return to the international market
Moving away from the capital market from 2020, the Salvadoran government returned to international stock exchanges with a$1 billion packageLast April, the funding of which would be used to pay the $486.7 million agreed in a repurchase of the bonds between 2025 and 2029.
These titles were issued with a coupon of 12 %, the highest of all international operations. The particularity of this placement lies in the terms assumed by the government in private meetings with investors, as the Bukele Administration undertook to sign an agreement with the International Monetary Fund (IMF) or achieve a two-point improvement in the sovereign rating by October 2025, if not the interest payment will increase by 4 %.
Internal and external debt
The central bank reports that foreign debt is the government’s main source of funding, with $12,667.3 million reported in June. The balance increased by $671.1 million compared to the same month in 2023.
For its part, domestic public debt reached $8,173.04 million, equivalent to an additional $621.2 million in the same month of 2023.
Letes’ debt, which is one of the most focused indicators, stood at $1,163.38 million last June, $149.2 million less compared to June 2023. According to the BCR’s history, it was the lowest balance since September 2022.
This article has been translated after first appearing in Diario El Mundo