LatinNews Daily - 27 October 2020

* The Guatemala-based economic think-tank Instituto Centroamericano de Estudios Fiscales (Icefi) has warned that the increase in social spending included in the Salvadoran government’s proposed 2021 national budget is “uncertain” due to an “exaggerated over-estimation of tax income”. The proposed budget is for US$7.45bn, up 16% on the US$6.4bn approved for 2020. According to Icefi, the budget proposal is based on projected income of US$5.88bn, of which 90.4% will come from taxes. However, Icefi considers this an overestimate. It cites the example of taxes on transfers of property and value-added tax (VAT) for which the collection target is US$2.63bn, up 33% on what the finance ministry expects to collect in 2020. Icefi’s concerns regarding the budget follow those raised by international credit ratings agency Fitch Ratings earlier this month. Fitch warned that implementing in full the proposed budget would “increase pressure on El Salvador's 'B-' sovereign rating from deteriorating debt sustainability metrics and financing constraints”.

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