El Salvador Boosts Economy, Reduces Debt with Bond Buybacks and Talent Attraction
El Salvador is taking steps to boost its economy and reduce debt. The country plans to distribute 5,000 free passes to skilled foreign professionals to enhance society. Meanwhile, it's buying back government bonds early to cut debt and has seen its creditworthiness improve.
El Salvador's public debt stands at over $20 billion, similar to Germany's in relation to economic output. Despite this, the country's bonds have performed exceptionally well, with a 70% return in 2023, making them the top emerging market government bonds of the year. This success is reflected in credit rating upgrades from S&P Global Ratings and Fitch Ratings, which improved El Salvador's rating from CCC to B- within the last year.
To further strengthen its financial position, El Salvador is reducing its debt by buying back bonds due in 2025, 2027, and 2029, with a combined outstanding amount of around $1.75 billion. A tender for holders to submit offers is ongoing from April 8 to April 15, 2024. This move follows previous successful bond buybacks, which helped regain the trust of creditors. The yield spread between US and Salvadoran government bonds has also fallen by 57 basis points to 6.2 percent since the start of the year.
While one in three Salvadorians still lives in poverty and unemployment remains a concern, El Salvador's efforts to reduce debt and attract talent show promise. The country's bond performance and improved creditworthiness indicate a positive direction, with ongoing debt reduction strategies set to further boost its economic outlook.
