Phoenix 24
Liquidity looks calm, until it becomes a test.
San Salvador, February 2026.
El Salvador’s international reserves have risen by roughly one billion dollars over the past year, strengthening the country’s external liquidity buffer at a moment when markets reward discipline and punish ambiguity. The increase is being framed through central bank data, with net reserve measures moving from the mid three billion range a year earlier into the mid four billion range. In a dollarized economy, that shift is not cosmetic. It signals that foreign currency inflows have outpaced outflows long enough to rebuild breathing room.
Part of the movement is mechanical. Reserves rise when dollars enter the system through public sector financing, remittances, and services income faster than they leave through imports, debt service, or capital flight. The story cited in regional reporting points to foreign currency holdings rising by hundreds of millions over the year, consistent with a broader net increase close to one billion. The exact figure can vary depending on whether one looks at gross components or net measures, but the direction is what markets care about: a larger cushion against shocks.
The deeper layer is structural. Remittances remain a major channel, and in recent years they have acted like an informal stabilizer, supporting consumption and liquidity even when investment is cautious. Tourism and services matter as well, especially when a security driven reputational shift converts international attention into spending. Trade dynamics also feed the reserve line when import demand is contained and dollar inflows are captured cleanly through the financial system. None of these drivers is glamorous, but reserve accumulation is rarely built by glamour. It is built by steady inflows, controlled leakages, and institutional follow-through.
The institutional layer is where the story becomes more global than regional. Since 2025, El Salvador has operated under a disciplined external financing framework linked to an International Monetary Fund program. In practice, that framework functions as a credibility amplifier with other lenders and rating agencies, because it signals constraints, benchmarks, and periodic review. Rising reserves under such a structure are interpreted as proof that rules are being followed, not just that money arrived.
Multilateral financing plays a parallel role. Large development flows do not always sit directly inside reserves, but they reduce stress elsewhere in the public sector and stabilize the broader balance of payments. Investors read this as scaffolding, a network of backstops that lowers rollover anxiety and reduces the probability of abrupt improvisation. The risk is that scaffolding becomes dependency if it substitutes for domestic productivity.
That vulnerability is embedded in the same indicator that looks like strength. If reserves rise mainly because of remittances and official inflows, the cushion is real but the engine is external. Any shock to diaspora income, migration patterns, or transfer channels can tighten liquidity quickly. Meanwhile, reserves can improve even if wages stagnate and domestic investment remains cautious, creating a split between macro stability and micro fragility. Politically, that split is combustible because “stability” feels abstract when households do not feel it.
A separate complication is narrative volatility. When a country runs two tracks at once, fiscal orthodoxy for creditors and symbolic disruption for branding, markets tend to price the uncertainty even if reserves look healthier on paper. The key issue is not ideology. It is transparency: clean accounting, clear boundaries, and predictable decision rules. Credibility is built when external buffers are paired with institutional clarity, not when buffers coexist with mixed signals.
The strategic takeaway is simple and uncomfortable. A billion dollars more in reserves buys time. It lowers immediate refinancing pressure and gives policymakers room to negotiate rather than react. But it also raises expectations: stronger revenue collection, cleaner expenditure control, deeper financial intermediation, and investment conditions that generate dollars through exports and services without constant external prompting. Reserves are not a destination. They are the interval in which a country either builds durable capacity or merely postpones the next stress test.
La verdad es estructura, no ruido. / Truth is structure, not noise.