In a historic move, El Salvador’s President Nayib Bukele has announced the country’s first debt-free budget for 2025, aiming to break away from its reliance on borrowing.
The proposed budget, which will be submitted to the Legislative Assembly on September 30, reflects a bold fiscal policy designed to balance government spending with revenues, marking a significant shift toward economic independence.
Bukele’s announcement, made during the 203rd anniversary of El Salvador’s independence, underscores his administration’s commitment to sustainable economic growth without accumulating new debt.
El Salvador targets zero budget deficit for 2025
President Nayib Bukele’s 2025 budget proposal represents a dramatic shift from previous years, as it aims for a zero-deficit, debt-free framework.
This move follows the 2024 budget, which faced a $338 million deficit in total spending of $9.1 billion.
Bukele’s strategy eliminates borrowing for everyday government operations, signaling a decisive break from decades of debt accumulation that has strained the country’s finances.
If passed, the new budget could serve as a model for fiscal responsibility and economic stability in the region.
For the first time in recent history, El Salvador’s budget will avoid both local and international borrowing.
Finance Minister Jerson Posada confirmed that the 2025 budget will be fully self-financed, marking a major fiscal turnaround.
In 2019, when Bukele took office, the budget deficit was $1.2 billion.
The proposed 2025 budget highlights the president’s ambition to create a self-sustaining economy where spending does not exceed revenues—a cornerstone of Bukele’s broader vision for economic independence.
Balancing El Salvador’s dual currencies
El Salvador’s ability to avoid deficit spending is partially influenced by its unique dual-currency system.
Since 2001, the country has used the US dollar as its official currency, limiting the government’s ability to print money and cover deficits.
In 2021, Bukele made headlines by adopting Bitcoin as legal tender, a move aimed at diversifying the country’s financial system.
While Bitcoin adoption has been controversial due to its volatility and mixed public reception, Bukele remains optimistic that it will contribute to El Salvador’s economic future.
Bitcoin reserves show potential gains but with risks
Although El Salvador has not officially disclosed its Bitcoin reserves, estimates from NayibTracker suggest the country holds around 5,874 Bitcoins, valued at approximately $331.4 million.
This would represent an unrealized gain of 32.6%, or $43 million, based on current market prices.
While Bitcoin’s integration into the economy has faced criticism, particularly due to its unstable value, Bukele sees it as a long-term strategic move to diversify the country’s financial assets.
However, he has acknowledged the limited adoption of Bitcoin so far and is working on improvements.
IMF discussions signal cautious optimism for El Salvador
In August, the International Monetary Fund (IMF) reported positive progress in its discussions with El Salvador regarding a potential support program.
The talks focused on strengthening the country’s public finances, improving governance, and managing risks associated with Bitcoin.
The IMF’s cautious optimism reflects growing international interest in El Salvador’s economic policies, especially its approach to cryptocurrency.
The outcome of these discussions could have significant implications for the country’s financial stability and long-term growth.
With Bukele’s Nuevas Ideas party holding 57 of the 60 seats in the Legislative Assembly, the 2025 budget is expected to pass with minimal opposition.
The party’s overwhelming majority virtually guarantees that the debt-free budget will be implemented, potentially reshaping El Salvador’s economic governance for years to come.
Bukele’s focus on fiscal responsibility, coupled with his bold economic strategies, sets the stage for a new era of financial independence in El Salvador.
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