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El Salvador: US$250 Million to Mitigate Global Financial Crisis

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July 16, 2009 - El Salvador has received vital reinforcements in its fight against the damaging effects of the global financial crisis on the country’s economy and people.

The World Bank announced an additional US$250 million assistance package for this fiscal year to support the so-called anti-crisis plan of newly elected President Mauricio Funes.

In a joint press conference after a private meeting in El Salvador, President Funes and regional World Bank vice president Pamela Cox explained that these funds will focus on social protection, education, health care, job creation and the public sector, among other areas.

Cox emphasized the Bank’s commitment to supporting government plans “to promote inclusive development with opportunities for all, especially now that the global economy is facing a crisis.”

In fact, a large part of this amount —about US$100 million— will be earmarked to support social expenditures, one of the most vulnerable areas in light of the global crisis. Part of the money will also be allocated to job creation, said Cox.

President Funes stressed the relevance of the World Bank’s support in combating the effects of the crisis.

Crucial assistance

"These loans are essential for us, without them we would not be able to implement the job creation programs we need to face the financial crisis,” he said, while highlighting the strategic value of the country’s partnership with the Bank for his medium-term social plans. His government –he added- will immediately begin work on an endorsement proposal to be submitted to the Legislative Assembly, which by law must approve these types of loans.

Cox, for her part, said that her team will promptly begin work on a new cooperation strategy with El Salvador, “focused on mitigating the effects of the global crisis and on supporting the government’s medium-term growth and socioeconomic improvement objectives for the country,” she said.

El Salvador has been hit hard by the global financial crisis with most estimates suggesting a GDP contraction of 1-1.5 percent for 2009, after posting a 4.7 percent increase in 2007 - the highest in a decade.

In addition, remittances —the country’s main source of external funding— decreased by almost 10% as a result of the economic slowdown in the United States.

As part of her Central American tour, Cox also visited Panama, where she met with President Ricardo Martinelli to discuss the Bank’s cooperation with his government, including US$150 million to be made available immediately, and a new Country Partnership Strategy for 2010-2013.

“Panama is an important partner and we have come here to reiterate the Bank’s support for the governmental agenda, as well as discuss future opportunities for cooperation,” said Cox.

Panama’s operation portfolio has increased significantly in the last two years, from three projects in 2007 to eight this year, for a total of US$400 million.