Treasury bills are short-term debt and allow the government to obtain liquidity; however, they have a limit that is about to run out, experts warned.
the Government of El Salvador is running out of one of its main sources of liquidity: the placement of Treasury Bills (LETES).
The LETES are papers issued by the State to terms of less than one year and allow the government meet temporary cash needs. However, under the Constitution, placing the maximum is 40% of the revenue for each year. The 2016 quota is running out.
The legal limit emissions, according to the 2016 budget Article 5, is $ 1,327.3 million, of which $ 868.9 million has already issued this year. "There are LETES to expire until December of this year, an amount of $ 368,170,000, and while no fresh sources of funds, will have to continue paying to the issue of new LETES" said Alvaro Trigueros, director of the Department of Economic Studies the Salvadoran Foundation for Economic and Social Development (FUSADES).
Taking into account the above, there are only $ 90 million available to finance the fiscal deficit with new LETES.
Between September and December 2016 to finance the fiscal deficit will be at least $ 350 million. "The funding by way of LETES is clearly insufficient and will not reach December without new resources. Most probably in October exacerbate the situation, "said Pedro Argumedo analyst FUSADES.
Saturday due $ 88 million Treasury Bills, and has not been able to pay a placement for this maturity.
A sample of the problems is that cash on June 23, with Decision No. 888, the Ministry of Finance requested approval to issue LETES $ 350 million to cover July to September 2016.
But on 12 August, in agreement # 1,133, requested to amend the agreement of June 23, he had already placed $ 265.9 million. The placement was extended to an additional maximum of $ 150 million. "These expansions placement LETES illustrate the difficult situation of public finances, as they are depleted faster fiscal space emission LETES" said Trigueros.
But the liquidity problems are only part of the gap is in the public finances, and that the Ministry of Finance has said should be corrected with more taxes and adjustments in spending.
The International Monetary Fund (IMF) has said the country needs an equivalent to 3% of gross domestic product (GDP), a $ 700 million adjustment. Is it possible to have an adjustment of this magnitude without the economy suffer consequences?
According Trigueros, there is a dilemma between two options: fiscal crisis or fiscal agreement for development. "A fiscal crisis generates high social costs, as history notes, for example, the lost decade of Latin America in the eighties, and always out of the crisis is due to a tax adjustment for order," he said.
For both analysts, the aim should be to achieve a tax agreement with development, finance and balance adjustment, prioritize the areas that provide development and improve the investment climate to increase employment opportunities for Salvadorans.
Finance Minister Carlos Caceres said during the accountability of the institution they expect the tax agreement is a "nation agreement". -