© Reuters. Protest against the removal of judges from the Supreme Court in San Salvador
By Rodrigo Campos and Nelson Renteria
SAN SALVADOR (Reuters) – The overthrow of Attorney General and Chief Justice of El Salvadoran President Nayib Bukele on Monday fueled calls for a reassessment of an expected deal with the International Monetary Fund (IMF), which will bring down national debt.
El Salvador is in the midst of negotiations with the IMF over a $ 1 billion program to fill budget gaps by 2023, after $ 389 million was approved last month to help the government deal with the COVID-19 pandemic to support, Reuters reported exclusively.
In Washington, however, there is growing political pressure to reconsider negotiations in light of the measures taken against the judiciary and prosecutors.
Senate Foreign Relations Committee Chairman Bob Menendez and Senate Funds Committee Chairman Patrick Leahy said President Joe Biden’s administration should notify the IMF that US support for funding in El Salvador is “out of respect.” depends on democracy, the independence of the judiciary and the rule of law “. “”
The United States is the most elected member of the IMF. The IMF had no comment late Monday.
A vote on Sunday by a newly formed congress in which Bukele’s allies have a two-thirds majority dismissed Attorney General Raul Melara, whose work included investigating secret negotiations between the Bukele government and street gangs.
Hours earlier, the new Congress ousted all five judges who sit in the constitutional chamber of the nation’s Supreme Court.
Nathalie Marshik, head of EM sovereignty research at Stifel, said she expected the IMF program to be suspended and saw no “catalyst for a positive outcome that would include a restoration of the court other than a restoration of the court” and a weakening of Bukeles rhetoric provides.
The country’s foreign bonds fell between 7 and 11 cents, with issues falling nearly 10 cents each in 2029 and 2032, yielding over 8% for the first time in over two months.
The issue, which matures in 2052, lost nearly 11 cents to trade at 102.5, which translates to a 9.251% return. El Salvador has USD 7.7 billion in marketable debt outstanding, according to Refinitive data.
US Vice President Kamala Harris said the moves had sparked “deep concern” about democracy in El Salvador. A senior government official said Washington would work with Bukele to encourage “more constructive behavior”.
The EU said in a statement that the steps “violate” the rule of law and the separation of powers and that they expect legal rights and the safety of judges to be guaranteed.
In contrast, China, which was only recognized by El Salvador in 2018, said that through its embassy it believed that the Central American nation could manage its own internal affairs, citing the principle of non-interference.
Without IMF funding, El Salvador would likely need funding from elsewhere to fill the budget gaps over the next few years.
“China would come to mind first, but we doubt the country would be willing to extend El Salvador’s funding needs,” said EM’s Marshik.
Biden’s government has cited corruption in El Salvador, Guatemala and Honduras as a major contributor to the increasing influx of migrants to the US-Mexico border, as well as to gang violence and poverty.
His government urges these governments to do more to fight crime.
The five ousted judges – the most powerful lawyers of the 15-member court – were among the few remaining controls over Bukele’s power. The ruling party’s lawmaker accused Melara, whose office has considerable powers to conduct investigations, of lack of independence and hindrance to the government’s health strategy amid the COVID-19 pandemic.