Editing Economy of El Salvador (section)

== Public sector ==
<gallery widths="200px" heights="110px">
File:Departments of El Salvador named.svg|[[Departments of El Salvador]]
File:Office Buildings San Salvador.JPG|[[Centro Financiero Gigante]] (CFG) is a full five tower complex of office buildings located in [[San Salvador]]
File:Citi san salvador.jpg|Cuscatlan Bank is headquartered at [[Torre Cuscatlán]]
File:Edificio-banco-agricola-sv.png|Banco Agrícola headquarter in [[San Salvador]]
File:La Gran Via.JPG|Lifestyle Center La Gran Via is one of many giant malls in El Salvador
File:Cajero Bitcoin El Zonte, El Salvador.jpg|An Athena Bitcoin ATM in El Salvador
File:Personas Cajero Bitcoin El Salvador.jpg|Salvadorans using an Athena Bitcoin ATM
</gallery>

[[Fiscal policy]] has been one of the biggest challenges for the Salvadoran government. In December 1999, net international reserves equaled US$1.8&nbsp;billion. Having this hard currency buffer to work with, the Salvadoran government undertook a monetary integration plan beginning in January 2001 by which the U.S. dollar became legal tender alongside the [[Salvadoran colón]], and all formal accounting was done in U.S. dollars. With the adoption of the U.S. dollar, El Salvador lost control over monetary policy. Any counter-cyclical policy response to the downturn must be through fiscal policy, which is constrained by legislative requirements for a two-thirds majority to approve any international financing.

The 1992 peace accords committed the government to heavy expenditures for transition programs and social services. The stability adjustment programs (PAE, for the initials in Spanish) initiated by president Cristiani's administration committed the government to the privatization of banks, the pension system, electric and telephone companies. The total privatization of the pension system has implied a serious burden for the public finances, because the newly created private Pension Association Funds did not absorb coverage of retired pensioners covered in the old system. As a result, in July 2017, the Government of El Salvador wanted to take $500 million from the privatized pension system to cover retired pensioners from the old not privatized system, but the Supreme Court of El Salvador declared this move unconstitutional.<ref>{{Cite news|url=http://www.laprensagrafica.com/2017/07/27/sala-anula-reforma-de-pensiones|title=SALA ANULA REFORMA DE PENSIONES|last=García|first=Gabriel|date=27 July 2017|work=La Prensa Gráfica|access-date=27 July 2017}}</ref>
The government lost the revenues from contributors and absorbed completely the costs of coverage of retired pensioners. This has been the main source of fiscal imbalance. ARENA governments have financed this deficit with the emission of bonds, something the leftist party FMLN has opposed. Debates surrounding the emission of bonds have stalled the approval of the national budget for many months on several occasions, reason for which in 2006 the government will finance the deficit by reducing expenditure in other posts. The emission of bonds and the approval of a loans need a qualified majority (3/4 of the votes) in the parliament. If the deficit is not financed through a loan it is enough with a simple majority to approve the budget (50% of the votes plus 1). This would facilitate an otherwise long process in Salvadoran politics.

Despite such challenges to keep public finances in balance, El Salvador still has one of the lowest tax burdens in the American continent (around 11% of GDP). The government has focused on improving the collection of its current [[revenue]]s with a focus on indirect taxes. Leftist politicians criticize such a structure since indirect taxes (like the value added tax) affect everyone alike, whereas direct taxes can be weighed according to levels of income and are therefore more punitive toward productive people. However, some basic goods are exempt from the indirect taxes. A [[value-added tax]] (VAT) of 10%, implemented in September 1992, was raised to 13% in July 1995. The VAT is the biggest source of revenue for the government, accounting for about 52.3% of total tax revenues in 2004.

As of 3 November 2014, the [[International Monetary Fund|IMF]] reports official reserve assets to be $3.192B. Foreign currency reserves (in convertible foreign currencies) are $2.675B. Securities are $2.577B with total currency and deposits at $94.9M. Securities with other national central banks (BIS and IMF) are $81.10M. Securities with banks headquartered outside the reporting country $13.80M. SDRs are at $245.5M. Gold reserves (including gold deposits and, if appropriate, gold swapped) reported at $271.4M with volume in millions of fine Troy ounces at $200k. Other reserve assets are financial derivatives valued at $2.7M.<ref>{{cite web |title=International Reserves and Foreign Currency Liquidity - EL SALVADOR |url=https://www.imf.org/external/np/sta/ir/IRProcessWeb/data/slv/eng/curslv.htm |access-date=11 June 2015 |website=Imf.org}}</ref>