El Salvador passes fiscal overhaul key to IMF deal

SAN SALVADOR (Reuters) -El Salvador's Congress on Tuesday passed a fiscal sustainability law aimed at strengthening public finances by tamping down on debt and boosting fiscal transparency, key to the nation's agreement with the International Monetary Fund (IMF).

The law, which passed by a vote of 59-1, establishes a fiscal rule that sets medium- and long-term debt targets, a medium-term fiscal framework, and an annual budget prepared and approved in accordance with the law. It also mandates the publication of fiscal data and medium-term projections.

"Fiscal management is being made transparent, with a projection to reduce debt to up to 70% of GDP over a five-year medium term," ruling party lawmaker Christian Guevara of the Nuevas Ideas party said.

"This is a new effort to project a new fiscal ceiling," he added.

In May, the IMF reached an agreement with El Salvador to disburse around $120 million after the first review of its $1.4 billion, 40-month program.

Further disbursements were dependent on the fiscal overhaul's passing.

"Fiscal consolidation will continue this year through cuts in the wage bill and current spending restraint, and plans are being developed to reform the civil service and the pension systems to underpin the adjustment beyond this year," the IMF said at the time. "This will be supported by the new fiscal sustainability law."

(Reporting by Nelson Renteria; Editing by Natalia Siniawski)

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