The economic boom that Nayib Bukele’s multimillion-dollar propaganda apparatus sells on social media, traditional media, and through influencers is a mirage.
The Salvadoran dictatorship has resorted to excessive debt to finance the consolidation of a single-party regime in El Salvador following his illegal re-election to a second term in 2024.
International organizations, local banks, and foreign investors have dealt loans totaling $7.596 billion, according to the regime’s financial reports from June 2024 through November 30, 2025. That’s one-quarter of public spending.
El Salvador is over-indebted and, in order to continue paying its debts, it needs to become even more indebted.
With the backing of the Trump administration and International Monetary Fund (IMF), Bukele can now access credit with financiers willing to ignore failures in transparency, fiscal sustainability, respect for the rule of law, and human rights.
El Salvador has had three important sources of funding in the last two years.
In 2024, it secured the backing of foreign investors through the issuance of $3 billion in bonds on international markets.
Multilaterals contributed $2.305 billion, while local investors (mostly banks and pension fund managers) contributed $1.272 billion by purchasing the regime’s securities on the local market.
With the door open to indefinite reelection in the February 2027 elections, Bukele jump-started the process of overloading budgets with loans.
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In his last two years in power, he has borrowed the same amount as in the previous five years of his legitimate first term (2019-2024) combined.
From 2019 to 2023, international organizations, local banks, and foreign investors threw a lifeline of $7.767 billion, which Bukele used to finance 20 percent of national expenditures.
Without this credit, El Salvador would not have the surplus of public funds to pay for the 440,000 laptops and school kits that it claims to have delivered this January.
Nor could it carry out the construction of the Pacific Airport or implement measures such as the use of A.I. in a new telemedicine program.
A rocky start
Between 2019 and 2021, corruption and opacity degraded El Salvador’s ability to sell debt on international bond markets.
The government issued more than $3 billion in debt to finance opaque trusts that became slush funds for corruption, issued no-bid emergency contracts for secret purchases, and failed to implement Bitcoin as legal tender.
Between 2021 and 2023, the markets punished El Salvador with high interest rates, above 10 percent, if the government went out to sell bonds on the international market. This kept the government from accessing this type of debt.
The Central American Bank for Economic Integration (CABEI) took advantage of this situation to increase their credit line with El Salvador.
“El Salvador is the country that received the most financial support during my administration. Feel free to give the country whatever adjective you want,” former CABEI president Dante Mossi, of Honduras, wrote on social media on February 16.
“I’m very happy to have supported President Nayib Bukele when international credit was closed off to him,” he added.
Under Mossi, CABEI was the main international financier of the Bukele brothers’ consolidation of power, injecting $1.03 billion toward the national budget and Territorial Control Plan.
A transnational investigation led by the Organized Crime and Corruption Reporting Project (OCCRP) called it the “dictators’ bank.”
CABEI has financed projects investigated for corruption, serious human rights violations, and environmental damage in Guatemala, Honduras, El Salvador, and Nicaragua.
In Bukele’s second term, CABEI has contributed a far reduced $40 million. In the 2024 and 2025 budgets, it is far from the main financier.
The Development Bank of Latin America, formerly known as the Andean Development Corporation (CAF), gave $583 million between 2024 and 2025.
And the International Monetary Fund (IMF) is currently disbursing a $1.3 billion credit line.
Optional obligations
Bukele has now bounced back from years when credit agencies forecasted sovereign default.
Due to the IMF agreement, four international organizations have opened new lines of credit available between 2025 and 2027.
In March 2025, the IMF reported “good prospects” for El Salvador over 12 months.
The Fund projected that funding from multilaterals would exceed $2.2 billion —half for direct budget support— including the World Bank, Inter-American Development Bank, Central American Bank for Economic Integration, and Andean Corporation.
On February 11, 2026, IDB President Ilan Goldfajn announced that the IDB is preparing a credit line for El Salvador equivalent to another agreement with the IMF. That would represent $1.3 billion for tourism and housing projects.
The IMF is also serving as a guarantor for the government in international markets. According to the Fund, the new credit lines from 2025 to 2027 mean El Salvador will have the capacity to pay old debts with new loans.
The IMF’s support has enabled the dictatorship to return to issuing bonds on international markets.
It also makes it easier to charge budget expenses to loans at a faster rate than in Bukele’s first term, but this time without any counterweight or obligation of transparency.
Although the IMF deal included transparency clauses, technicians have validated vague and incomplete reports from state-owned and mixed companies not complying with audit standards.
To date, six years after the start of the Covid-19 pandemic, the government has still not published the register of final beneficiaries of the companies awarded emergency contracts.
Bukele committed to doing so under the IMF deal. Nor has El Salvador begun to dismantle or sell Chivo, the government crypto wallet, another commitment.
Bukele has continued to publicize bitcoin purchases for public reserves, despite striking it down as legal tender. By May 2025, Bukele had announced the acquisition of eight bitcoins, although there is no public information to verify that claim.
Municipal chopping block
The only public information on public coffers in El Salvador are reports that the Ministry of Finance reluctantly releases as part of its IMF commitments.
To keep these lines of credit open, Bukele agreed to make a fiscal adjustment of 3.5 percent of gross domestic product in three years.
That means massive cuts in social spending: $623 million in 2025, set to grow to $1.039 billion in 2026 and $1.41 billion in 2027.
Under a reform ordered by Bukele, municipalities had funds for public works taken away in November 2021, with the creation of the Municipal Works Directorate (DOM).
Whereas municipalities were previously allocated a slice of the budget, now it is the Presidency that decides who will receive money, and who will not, for “strategic projects.”
Sixty percent of funds that the Treasury sent to municipalities before 2021 were redirected to the DOM, a dependency of the Presidency.
In 2025, there was a reduction of $293 million for local projects; $77 million less in 2026; and a cut of $80 million is set to occur in 2027.
This meant that, from an average of $500 million received each year by local governments, they went on to receive only $200 million.
The government promised the IMF further cuts over the next three years from the 44 municipalities.
Bitter medicine
In public speeches during his second term, Bukele has compared himself to the nation’s doctor, prescribing “bitter medicine” to “cure the economy.”
Bukele promised the IMF cuts in goods and services: $293 million in 2025; $308 million in 2026; and $403 million in 2027.
Social spending reductions are staggered and, in the case of salaries, Bukele promised a cut of $293 million in 2025, $500 million in 2026, and $644 million in 2027.
In December 2025, staff at Rosales Hospital received layoff notices. The hospital, for decades one of the most important in El Salvador, had 1,818 employees.
“They fired us verbally, and human resources will tell us how much money they will be able to give us,” one person who was laid off told YSUCA.
Another employee said she was verbally offered $6,800 in severance, on the condition that she agreed to be sanctioned.
“If we accept severance pay, we won’t be able to apply for another public sector job for at least five years, and we don't have a dismissal letter,” she said.
The Movement of Dismissed Workers (MTD) reported that 7,772 people were dismissed, including employees of the Ministry of Health, Fosalud, Rosales Hospital, and the Salvadoran Social Security Institute.
Meanwhile, the government is gradually replacing primary care personnel with a telemedicine program implementing A.I.
On April 22, 2024, the government signed a $77 million loan with the CAF to finance Hospital El Salvador, the former fair and convention center that was adapted as a hospital during the pandemic.
The loan is for the “program to implement a telemedicine system in El Salvador.”
In 2024, the government incorporated $33 million of this loan into the budget, and in 2025, $11 million. The CAF loan will be used to pay for the state’s heavily publicized Doctor SV app.
The secretary of the Union of Social Security Medical Workers, Rafael Aguirre, questioned the government's commitment to Doctor SV.
“Only 5% of the population uses this application,” he said in a television interview, referring to statistics on downloads of the app on cell phones and low coverage in rural areas.
“Sixty percent of the population who die do so due to cardiovascular diseases and chronic degenerative diseases that cannot be treated with the app,” Aguirre added.
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Senior teachers are also being forced to accept a “voluntary retirement” decree. By 2026, hundreds of health workers were laid off from Rosales Hospital and the Supreme Court.
In December, a constitutional reform stripped the Judiciary of budgetary autonomy it had enjoyed since the 1992 Peace Accords.
The Judiciary’s budget of $492 million in 2025 fell to $369 million this year, across salaries, goods and services, and infrastructure.
Second pension reform
Twenty-eight years have passed since El Salvador created a private pension system, AFP. For the first time, starting this year, a large group of workers who contributed throughout their lives are beginning to retire.
The AFP fund is fed by the monthly contributions of employers and the 20 percent of formally employed workers. To be eligible, workers must contribute to the AFP for 25 years; men can retire at age 60 and women at 55.
But an IMF technical mission warned that the pension fund’s Solidarity Guarantee Account —which provides liquidity to pay out pensions— is at risk of running out in August 2027.
Instead of repairing damage to the AFP fund, the government has spent four years deepening it.
In 2023, Bukele enacted the first phase of pension reform. During that period, the government failed to honor its commitments, cutting almost $2 billion in AFP funding.
El Salvador must carry out a second pension reform before August 2027, when the Solidarity Guarantee Account is depleted.
February 11, 2026, was the deadline for the regime to release its pension reform proposal, according to the schedule submitted to the IMF.
The regime failed to comply with the schedule and, as of the writing of this article, has not made public the draft pension reform.
Among the possible measures to stem the damage are increases in the retirement age and employer and worker contributions.
These are two measures designed to solve the regime's cash flow problems and to continue feeding the cycle of over-indebtedness.
Fewer people retire, the pension fund grows, and the regime can continue to use the fund to force the AFP program to buy more government debt.