ESF FY 91 balance of payments program

Policy conditionality will focus on efforts in (1) economic stabilization and adjustment, (2) public sector efficiency, and (3) judicial reform. Program funds will be used for U.S. imports, with an equivalent amount of local currency set aside for agreed upon development purposes. Macroeconomic policy reform targets are to: (1) reduce the fiscal deficit to 2.6% of GDP and the balance of payments deficit to 5.5% of GDP, achieve a GDP growth of 3%, and limit inflation to 10-14%; (2) eliminate most of the remaining exemptions to import tariffs and the stamp tax; and (3) eliminate the official paper tax. Public sector efficiency targets include: (1) measures to improve tax administration, including, inter alia, raising penalty interest rates to market rates, requiring tax payments at time of filing, reducing the period for banks to transfer tax proceeds collected to the Ministry of Finance from 45 to 3 working days, and simplifying alcohol and beverage taxes; (2) improvement of public sector financial management and auditing operations; and (3) rationalization of public sector employment through creation of a Presidential Commission to privatize or liquidate state-owned enterprises and through a study of the public sector employment and wage structure. The Salvadoran judicial system will be modernized through a 4- step process, as follows: (1) creation of a technical support unit within the Ministry of Justice to prepare a new legislative agenda; (2) a public awareness campaign and open public hearings to discuss judicial reforms; (3) a study of the selection process and terms of office for the Supreme Court; and, finally, (4) legislation to broaden the composition of the National Council for the Judiciary.