El Salvador finance minister says possible IMF deal no panacea

FILE PHOTO: El Salvador's Finance Minister Alejandro Zelaya speaks during a news conference in San Salvador, El Salvador March 18, 2022. REUTERS/Jose Cabezas

SAN SALVADOR (Reuters) - Salvadoran Finance Minister Alejandro Zelaya minimized on Thursday the potential positive impact of a long-delayed deal with the International Monetary Fund, even as the highly indebted country stares down a possible medium-term default.

El Salvador announced it was negotiating a possible $1.3 billion loan with the IMF in March 2021, aimed at filling gaps in the Central American country's budget and reducing high costs associated with the country's debt, which in March surpassed $24 billion.

The deal's future has looked uncertain since El Salvador rebuffed IMF calls for the government to reverse its decision to make bitcoin legal tender last September.

In his remarks on Thursday, Zelaya said discussions with the IMF continue but played down the deal's fiscal impact, which he said would amount to less than 10% of the national budget.

"You have to put all these issues into context, but we're maintaining conversations and once we have something concrete we will announce it."

Analysts including ratings agency Moody's say the deal would boost El Salvador's credibility and help shore up its shaky finances.

"I've seen that some analysts believe that the deal with the IMF is going to completely improve the health of the country's public finances, and no, it is one part of our strategy for improvement," Zelaya said.

(Reporting by Nelson Renteria; Writing by Brendan O'Boyle; Editing by Sandra Maler)

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