The World Bank has approved a new loan to support El Salvador in strengthening its fiscal sustainability and improving its ability to respond to natural disasters and climate change. The financing package, totaling US$350 million, includes a US$100 million Catastrophe Deferred Drawdown Option (Cat DDO), which can be accessed following an official emergency declaration caused by natural or health-related disasters. This initiative marks the first in a series of three planned operations.
According to El Salvador’s Minister of Finance, Jerson Posada, the country has made significant strides in stabilizing its economy and enhancing public financial management. He emphasized that the new funding reflects the government’s commitment to responsible fiscal policies while increasing protections for citizens facing growing climate risks. The program is aligned with national objectives to maintain macroeconomic stability and generate productive employment.
The initiative is structured around two key pillars. The first focuses on improving fiscal sustainability by enhancing public financial management systems, optimizing the public wage structure, and updating civil service regulations. It also promotes more efficient public investments and encourages private sector involvement in infrastructure development through improved public-private partnership frameworks.
The second pillar centers on strengthening disaster resilience and climate preparedness. Measures include deploying financial risk management tools, upgrading building codes to enhance safety, and boosting emergency response capabilities. Urban planning initiatives in the San Salvador metropolitan area aim to benefit more than 200,000 people through the development of green spaces designed to reduce heat and prevent flooding.
This operation also supports El Salvador’s ongoing program with the International Monetary Fund by reinforcing fiscal responsibility and prioritizing climate-resilient investments. World Bank Country Manager Carine Clert highlighted the dual focus on fiscal efficiency and climate resilience, stating that the program will help create jobs, deliver better services, and foster safer living conditions for communities.
The financing will be provided by the International Bank for Reconstruction and Development (IBRD) and will be implemented over the next three years. It is part of a coordinated international effort involving the IMF and other multilateral development partners to support El Salvador’s economic and environmental goals.
