Economy & Business - September 2003
EL SALVADOR: Budget pressures
Next year is an election year and this will impose a (small) extra burden on the budget. The government admits that although investment in social projects is the priority for 2004, it will have to spend a lot of money on the elections, transfers to municipal governments, improving the court system and making a contribution to the old public pension system. All in all, these administrative expenses will swipe US$565m from a budget of US$2.79bn.
Under the traditional budget formula, 6% of current budget income has to go the judicial system and another 6% has to go to municipalities. A further 6% of the current income has to go on restoring the deficit in the public pension system. The government also has to pay for the elections next March. The cost of the elections is likely to be US$12.2m. The transfers to the municipalities may have to rise: the supreme court has yet to decide whether the 6% transfer should in fact be 8%.
These four items of expenditure all have to be financed by the Fondo General de la Nación. This means that they cannot draw on the proceeds of foreign debt issues. One of the steepest increases envisaged for 2004 is in the administration of justice. The cost of this is budgeted to rise by 22%, to US$137m. Municipalities will also get a decent real increase in their federal transfers, albeit 8%, to US$114m.
The biggest winner, however, is the pension system: the government is budgeting to increase payments to the system by a thumping 45%, to US$301m.
Overall, the government is budgeting on spending US$2.79bn. Of this 91%, (US$2.5bn) will be financed through the general fund. Another 7% will be financed through foreign borrowing, and the remaining 2% will be financed through aid donations.
The government is reckoning on US$1.9bn in current income in 2004. Of this US$1.88bn will come from tax revenues and US$80m from non-tax revenues. The big foreign borrowers will be the education ministry (where US$39m of its expected spending of US$464m will come from foreign loans); the health ministry (US$13m of US$251m) and the public works ministry (US$92m of US$221m).
Under the traditional budget formula, 6% of current budget income has to go the judicial system and another 6% has to go to municipalities. A further 6% of the current income has to go on restoring the deficit in the public pension system. The government also has to pay for the elections next March. The cost of the elections is likely to be US$12.2m. The transfers to the municipalities may have to rise: the supreme court has yet to decide whether the 6% transfer should in fact be 8%.
These four items of expenditure all have to be financed by the Fondo General de la Nación. This means that they cannot draw on the proceeds of foreign debt issues. One of the steepest increases envisaged for 2004 is in the administration of justice. The cost of this is budgeted to rise by 22%, to US$137m. Municipalities will also get a decent real increase in their federal transfers, albeit 8%, to US$114m.
The biggest winner, however, is the pension system: the government is budgeting to increase payments to the system by a thumping 45%, to US$301m.
Overall, the government is budgeting on spending US$2.79bn. Of this 91%, (US$2.5bn) will be financed through the general fund. Another 7% will be financed through foreign borrowing, and the remaining 2% will be financed through aid donations.
The government is reckoning on US$1.9bn in current income in 2004. Of this US$1.88bn will come from tax revenues and US$80m from non-tax revenues. The big foreign borrowers will be the education ministry (where US$39m of its expected spending of US$464m will come from foreign loans); the health ministry (US$13m of US$251m) and the public works ministry (US$92m of US$221m).
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