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Bonds News

UPDATE 2-El Salvador not in talks with China over loan deal, minister says

(Adds finance minister’s comments on China)

SAN SALVADOR, May 6 (Reuters) - El Salvador is still negotiating with the International Monetary Fund and other multilateral organizations to secure a loan deal, and is not talking to China about the possibility, Finance Minister Alejandro Zelaya said on Thursday.

In an interview with Reuters, Zelaya said El Salvador was not seeking to secure an agreement with any non-traditional partners of the Central American country.

El Salvadoran President Nayib Bukele’s ouster over the weekend of the country’s attorney general and top judges fanned calls on Monday for a reassessment of an expected deal with the IMF, sending sovereign debt tumbling.

“It hasn’t had an impact. I’ve talked with multilateral organizations,” said Zelaya, who said he held talks on Sunday with the Inter-American Development Bank, World Bank and the Central American Bank for Economic Integration.

“I also spoke with the International Monetary Fund on Monday. The talks are still ongoing,” Zelaya said. “We don’t see a scenario in which the agreement with the IMF fails, not at all.”

El Salvador is in the middle of negotiations with the IMF for a $1 billion program to patch budget gaps through 2023, following $389 million approved last month to help the government deal with the COVID-19 pandemic.

But political pressure is now growing in the United States for the negotiations to be reconsidered in light of the moves against the judiciary and prosecutor.

Without IMF funding, El Salvador would likely need financing from elsewhere to cover budget holes in the next few years and some have speculated that China could step in.

Zelaya said that El Salvador was not in talks with China and that China had not offered help, without giving details.

“There has been a lot of speculation that there are other sources of financing, that China might approach us ... We’re not looking for sources of financing (outside) our traditional partners as of now.”

Reporting by Nelson Renteria; Writing by Anthony Esposito; Editing by Will Dunham and Sonya Hepinstall

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