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LatinNews Daily - 23 June 2021

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In brief: El Salvador approves extra finance to address pandemic impact

* El Salvador’s 84-member unicameral national legislature has approved a US$50m loan with the International Bank for Reconstruction and Development (IBRD), an institution which is part of the World Bank (WB) Group, for projects aimed at addressing the impact of the coronavirus (Covid-19) pandemic such as funding the national vaccination plan. The legislature, in which the ruling Nuevas Ideas (NI) party now has a two-thirds majority, also approved reforms which authorise the government led by President Nayib Bukele to issue bonds and/or contract new loans for just over US$160m to address the impact of the pandemic, which resulted in the country’s GDP contracting 7.9% in 2020. In April international credit ratings agency, Fitch Ratings, estimated that El Salvador would have total financing needs of US$2.4bn (9.2% of GDP) in 2021, including to fund the central government's deficit and US$543m in debt amortisations (excluding short-term debt as well as arrears). Fitch forecasts that El Salvador’s debt-to-GDP ratio will rise to 91.8% this year, up from 89.2% in 2020 and 70% in 2019. It also said it expected that the country’s fiscal deficit will narrow to 7.5% of GDP in 2021, down from 10.1% of GDP in 2020.