An International Monetary Fund mission led by Mr. Mario Garza visited San Salvador during February 6-15, 2012 for discussions on the fourth review under the Stand-By Arrangement (SBA). The mission met with Technical Secretary Alexander Segovia, Finance Minister Carlos Cáceres, Central Bank President Carlos Acevedo, other senior officials, and business representatives.

Mr. Garza issued the following statement at the conclusion of the mission in San Salvador:

“In 2011, economic growth is estimated at about 1.5 percent, somewhat lower than projected, owing to the adverse impact of a tropical depression. Tax revenue performed strongly, but current expenditure pressures resulted in the fiscal deficit and public debt exceeding program targets for end-2011.

“For 2012, economic growth is projected at 2-2.5 percent, supported by some recovery in domestic investment. The mission and the authorities are in agreement that the overall fiscal deficit should be reduced to 2.7 percent of Gross Domestic Product (GDP), which would lower the public debt-to-GDP ratio this year. The authorities’ fiscal strategy is based on a further strengthening of revenues, building on the income tax reform adopted in January, and a scaling-up of public investment. While the mission took note of the political context surrounding the March 2012 congressional election, it encouraged the authorities to achieve these fiscal goals by taking actions to control current spending and reduce untargeted subsidies. In the financial system, the authorities will make further strides in their strategy to shift to risk-based supervision and strengthen the liquidity buffers of the banking system.

“The authorities and the mission will continue their dialogue with a view of completing the fourth review under the SBA.”