El Salvador president cheers big Congress election win, bonds jump

SAN SALVADOR (Reuters) - El Salvador’s president, Nayib Bukele, declared a major victory in legislative elections, citing a projection that his party and its allies had won the biggest congressional majority in the country’s history.

FILE PHOTO: El Salvador's President Nayib Bukele, accompanied by his wife Gabriela de Bukele, shows his finger after casting his vote during the municipal and parliamentary elections in San Salvador, El Salvador, February 28, 2021. REUTERS/Jose Cabezas/File Photo

“Historic! Thank you Salvadoran people. Thank God,” Bukele said late on Monday night, tweeting a graphic that projected his party and ally GANA would take 61 of the 84 seats in Congress.

A preliminary count by electoral authorities showed Bukele’s New Ideas party and its allies had won some 70% of the vote, but the seat distribution will not be known until a final count that will take several days.

Bukele, 39, is one of the world’s youngest leaders. He won a landslide victory in 2019 on a pledge to root out corruption, but has faced criticism from rights groups and foreign powers for what they see as his autocratic leanings.

With the landslide victory, the New Ideas party will have a sweeping ability to elect an attorney general and Supreme Court judges, and approve budgets and constitutional reforms in the Central American nation.

El Salvador sovereign dollar bonds jumped after Bukele’s announcement, with many issues trading at their highest levels in a year.

Fitch Ratings said the legislative election victory ends political gridlock that had hindered policy implementation and dented the country’s ability to tap external funding. It was not clear, however, whether the strong majority would lead to swift new policies to bolster public finances.

The country faces the amortization of around $328 million of Letes, or treasury bills, in March, according to analysts.

A lending program from the International Monetary Fund (IMF) would be contingent on the government’s commitment to fiscal adjustment, Fitch added.

“Bukele has yet to set out a medium-term fiscal strategy,” the agency said in a statement. “Weak economic growth was already weighing on debt dynamics pre-pandemic and, coupled with the impact of COVID-19, creates political pressure for more expansionary policies to reduce poverty and boost employment.”

The agency also warned the ruling party’s new power boost could “weaken institutional checks and balances.”

El Salvador is expected to experience a dip in economic growth next year to 2.5%, after an expected 5% rebound in 2021, Fitch said.

Reporting by Nelson Renteria in San Salvador; Writing by Cassandra Garrison; Editing by Paul Simao and Matthew Lewis