Months ago, discussions on the internet created confusion about El Salvador supposedly “eliminating its external debt” after statements made by President Nayib Bukele in 2024. Much of the commentary circulated without full context, leading to a partial or inaccurate understanding of the situation.
In reality, El Salvador has made progress in managing its debt and reducing reliance on new foreign loans — but it still maintains a significant external debt burden.
📊 The Current Situation
As of early 2025, El Salvador’s external debt stands at around US $24–25 billion, according to data from the World Bank and Trading Economics.
This means the country continues to owe substantial amounts to foreign creditors, development banks, and international markets.
However, El Salvador has successfully avoided default, even after facing heavy skepticism in 2022 and 2023. The government repaid an $800 million bond in full in January 2023 and has since repurchased and refinanced other bonds to improve its debt profile.
🏛️ Why El Salvador Still Has Debt
When Nayib Bukele took office in 2019, the country’s finances were nearly depleted.
Previous governments — one from the right-wing ARENA party and another from the socialist FMLN — had emptied much of the state’s reserves, including gold reserves that fell to less than 7 % of their historical levels. Practically, the only significant public funds that remained were those belonging to the pension system.
The pension system itself, however, represented a heavy financial burden, forcing the government to allocate a large portion of annual revenue to meet obligations toward retirees.
Because of this, the new administration inherited a government with high debt, low reserves, and limited cash flow. During its first years, it had little choice but to seek new loans to sustain essential operations and fund infrastructure projects.
However, after stabilizing public finances, El Salvador has stopped requesting external loans to cover current expenditures in the General Budget of the Nation since 2024–2025, marking a significant shift toward greater fiscal self-sufficiency.
📈 What Has Changed Under Bukele
Over the past few years, El Salvador has taken concrete steps to improve its fiscal position and reduce reliance on foreign borrowing.
President Bukele declared (2024):
“This September 30, we will present to the Legislative Assembly, for the first time in decades, the first fully financed budget. It will no longer be necessary to issue debt for current expenditures, not even for the payment of debt interest.”
President Bukele emphasized, “El Salvador will no longer spend more than it produces annually”.
This statement reflects the government’s goal of covering all operational expenses with domestic revenue — something that previous administrations were unable to achieve.
In practical terms, El Salvador has:
- Paid off major bond maturities and repurchased some external debt early.
- Reduced reliance on foreign loans for current spending.
- Increased tax collection and domestic revenue, according to government data.
- Negotiated refinancing with international banks and institutions under improved terms.
At the same time, public investment has expanded, especially in infrastructure and security — areas that continue to require financing but are intended to strengthen the economy over the long term.
❓Is It True That External Debt Has Been Eliminated?
➡ No, El Salvador has not eliminated its external debt.
What has happened is that the country has stabilized its debt situation and is reducing its dependence on new foreign borrowing, after years of fiscal crisis and empty reserves.
The government now aims to finance most of its annual budget without contracting new external loans, but existing debt obligations remain and continue to be serviced.
In short, El Salvador has made progress — but elimination of its external debt is not yet a reality.
Related terms: El Salvador president Nayib Bukele announces elimination of external debt.
