World Bank Approves El Salvador Loan

El Salvador will receive a $100m loan from the World Bank. Proceeds will be used to expand the government spending for basic social services in rural and urban areas. The loan will address shortcomings in tax administration and is expected to bridge a shortfall in revenues of $98m. The goal of the program is to increase the country’s total tax revenues to 14.8% GDP from 13.3%, a nominal increase of $368m by 2012. Tax revenues as a percentage of GDP are low in El Salvador and represent a constraint on expanding public services and social aid. In 2008, tax revenues were about 27% of GDP on average in OECD countries, while they were about 16.1% in LatAm and 13.0% in El Salvador. The loan has a 30-year maturity period, including a 5-year grace period.