What happened
After a long stall, momentum returned to El Salvador's IMF program. In late July, after a conversation with President Nayib Bukele, IMF No. 2 Dan Katz said that "great progress" was being made. The lender, based in Washington, announced last week a staff-level agreement covering two overdue reviews that would release around $140 million once the executive board approves it.
The arrangement runs through early 2028 and has seven total check-ins. For the two staff-level reviews, the initial deadlines had been September 2025 and March 2026.
How markets reacted
Bonds jumped on the shift. Since Katz's comments, El Salvador's dollar debt has gained 2.3%, the strongest showing among Latin American sovereigns over that stretch, according to Bloomberg. JPMorgan's data shows the extra yield over US Treasuries has tightened to the lowest level since 2010. JPMorgan economists said the agreement breaks "a logjam that had stalled the program for almost a year" and helps the country's position in global markets.
Matthew Graves of PPM America, who oversees emerging-markets portfolios, said, "Getting the reviews agreed is definitely good news and certainly lends support to the market." He added, "El Salvador trades at pretty compressed spreads for its current rating, so we think they'll need to continue along a path where everything sort of goes to plan for spreads to remain anchored at these levels."
Morgan Stanley strategists expect the board to approve on time, while noting the bonds already trade tight versus other single B credits. For context, Argentina, which shares a B- rating at Standard & Poor's, trades at almost 500 basis points over Treasuries, compared with 271 for El Salvador. Similarly rated Ghana is around 218 basis points.
If the IMF's executive board signs off by early October on both reviews, El Salvador's interest-only notes would see their coupon revert to 0.25% from 4%.
Global developments remind investors that steady habits protect and grow long term savings. Join Briefs Finance CEO Jaspreet Singh on September 29th for a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, where he shows how we're spotting investment opportunities as the dollar falls. Save your spot.
What changed on policy
IMF staff pointed to several improvements, including shifting majority ownership of Chivo, the government-launched digital wallet, to a private operator. Chivo, rolled out in 2021, was designed for transactions in Bitcoin and US dollars.
Officials also turned over documentation showing that, since the first review, the Bitcoin stockpile came via private donations and used no public resources, while they withheld the donors' identities.
The next hurdle and why it matters to you
Growth is running hotter than expected, with economic activity up 5.2% year over year in both May and June. Citigroup highlights a construction boom driven by both public and private investment. With the Bitcoin dispute largely addressed and growth firming, attention shifts to pension reform.
The IMF had earlier expected a "comprehensive reform" by early 2026, and now indicates it will be put in place next year. Investors say real movement may be hard before February's presidential elections. The country still faces a structural pension deficit and a key test in 2027, as the four-year hiatus on paying interest to private pension funds comes to an end.
"Pushing out the pension reform does create some risks, but makes sense given the electoral calendar," said Katrina Butt, who manages portfolios at AllianceBernstein.
At T. Rowe Price, emerging-markets sovereign analyst Christopher Mejia views pension reform as the main item to monitor and stays positive on the sovereign bonds. "Valuations aren't as attractive," Mejia said. "But hardly anything across credit is these days."
Staying focused on a clear plan helps preserve wealth through uncertain economic times. Our CEO Jaspreet Singh is hosting a FREE live investor workshop, How to Profit From A Dollar That's Losing its Value, on September 29th. Sign up free to join him live.
