Central America Social Expenditures and Institutional Review
El Salvador’s development over the past decade has been dichotomous. On the one hand, economic growth has remained persistently low, employment and labor force participation have barely increased, and progress on poverty reduction has slowed. On the other hand, inequality has fallen, and shared prosperity improved together with advances in many social indicators, such as pre-primary enrollment rates, access to prenatal care, immunizations, and water and sanitation. The increase in the use of social spending, which now accounts for 12.4 percent of GDP, together with an improvement in the quality of social spending, explain at least part of this dichotomy of redistributive and social gains despite low growth, a tight fiscal situation and generally low government revenues and spending. Looking forward, the key challenges El Salvador faces are related to continuing improving the quality and efficiency in the social sectors, while maintaining the overall level of social spending within an increasingly constrained fiscal environment, where fiscal constraints, low revenues, and the need to cut the deficit by 3 percent of GDP are significant elements, as well. Priority will have to be given to reallocations and improvements within the spending envelope for the social sectors to maximize impact. This document analyzes social spending for El Salvador for the education, health and social protection and labor sectors in depth and explores a series of policy options for El Salvador to reallocate social spending for more effective impacts, to enhance and reform social policies and social service delivery, and to improve the management of public spending and budget execution in the social sectors.
Summary: | El Salvador’s development over the past
decade has been dichotomous. On the one hand, economic
growth has remained persistently low, employment and labor
force participation have barely increased, and progress on
poverty reduction has slowed. On the other hand, inequality
has fallen, and shared prosperity improved together with
advances in many social indicators, such as pre-primary
enrollment rates, access to prenatal care, immunizations,
and water and sanitation. The increase in the use of social
spending, which now accounts for 12.4 percent of GDP,
together with an improvement in the quality of social
spending, explain at least part of this dichotomy of
redistributive and social gains despite low growth, a tight
fiscal situation and generally low government revenues and
spending. Looking forward, the key challenges El Salvador
faces are related to continuing improving the quality and
efficiency in the social sectors, while maintaining the
overall level of social spending within an increasingly
constrained fiscal environment, where fiscal constraints,
low revenues, and the need to cut the deficit by 3 percent
of GDP are significant elements, as well. Priority will have
to be given to reallocations and improvements within the
spending envelope for the social sectors to maximize impact.
This document analyzes social spending for El Salvador for
the education, health and social protection and labor
sectors in depth and explores a series of policy options for
El Salvador to reallocate social spending for more effective
impacts, to enhance and reform social policies and social
service delivery, and to improve the management of public
spending and budget execution in the social sectors. |
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