IMF meets Salvadoran delegation in Washington

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NEW YORK – The International Monetary Fund said on Wednesday it has been meeting this week in Washington with a delegation from El Salvador, for annual talks which the Fund said could “underpin” discussions about a new lending program.

The Salvadoran government is looking to revive talks over a potential $1 billion loan agreement. The Fund has said discussions about that agreement have been stalled since April.

The sacking of five Supreme Court judges and the dismissal of the top prosecutor in May soured the relationship of Nayib Bukele’s government with the United States, the largest IMF shareholder. The U.S. government’s anti-corruption stance in the region has also been a sticking point between the two countries.

“Developments since (April) will require some recalibration of policies needed to ensure inclusive growth, fiscal sustainability and financial stability,” said Alina Carare, IMF mission chief to El Salvador.

“The dialogue will be around policies that would underpin a potential IMF program.”

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The meetings began Monday afternoon, the Fund said, and will continue virtually for the rest of November when the delegation returns to El Salvador.

The Salvadoran government did not immediately respond to requests for comment.

“The 2021 Article IV consultation process will be completed after the discussions at the Executive Board, which will take place a couple of months after the end of the mission,” said Carare, referring to the IMF’s regular procedure for reviewing its member countries.

Salvadoran bond spreads to U.S. Treasuries rose to a record high above 1,100 basis points in late September and are currently above 1,000 bps, all but shutting the country from financing markets and highlighting the importance of a deal with the IMF.

(Reporting by Rodrigo Campos in New York and Gerardo Arbaiza in San Salvador; Editing by Peter Graff)