IDB Approves $170M Loan to Boost Urban Growth and Commerce in El Salvador

The Inter-American Development Bank (IDB) has approved a $170 million loan to support El Salvador’s efforts to strengthen local economies, modernize infrastructure, and improve public services in the municipalities of Santa Tecla and La Libertad. The programme is expected to transform urban environments in both districts, benefiting residents, small-scale merchants, and millions of visitors each year.

Revitalizing Markets and Urban Spaces

A central component of the initiative is the revitalization of municipal markets in Santa Tecla and La Libertad. These markets will be upgraded to become universally accessible and climate-resilient, ensuring that local vendors and shoppers can benefit from safer, more inclusive, and modern facilities.

The project also aims to renew public spaces across both municipalities, including streets, plazas, parks, and green areas. These upgrades are intended not only to improve the quality of life for residents but also to attract visitors and stimulate economic activity.

Empowering Small-Scale Merchants

The IDB-financed programme is expected to directly benefit 2,000 small-scale merchants—1,500 in Santa Tecla and 500 in La Libertad—by expanding their productive and commercial capacity. It will introduce tools such as digital payment solutions, enabling businesses to modernize transactions, increase efficiency, and reach broader customer bases.

This investment is particularly significant for small traders, who are the backbone of local economies. By equipping them with modern infrastructure and services, the programme seeks to foster entrepreneurship, support livelihoods, and boost household incomes.

Building Institutional Capacity

Beyond physical infrastructure, the project also focuses on strengthening the institutional and financial capacities of the municipalities of Libertad Sur and Libertad Costa. By improving management practices, financial planning, and governance structures, the programme will ensure that local governments are better prepared to manage rapid urban growth sustainably.

Direct and Indirect Beneficiaries

The programme will have a wide-reaching impact:

• 2,000 merchants will directly benefit from revitalized markets and improved business opportunities.

• Around 1,800 residents of Santa Tecla and 2,500 residents of La Libertad will experience better public services and safer, more vibrant urban spaces.

• The improvements will also enhance the experience of La Libertad’s estimated 3.8 million annual visitors, many of whom are drawn by its beaches, cultural heritage, and gastronomy.

By improving infrastructure and amenities, the project aims to make these destinations more attractive to both domestic and international tourists, thereby increasing revenue for local economies.

Financing Terms

The $170 million loan approved by the IDB has favourable terms, with a 25-year repayment period, a 5.5-year grace period, and an interest rate linked to the Secured Overnight Financing Rate (SOFR). These conditions reflect the IDB’s commitment to supporting sustainable development while ensuring manageable financial obligations for El Salvador.

Strengthening Communities and Tourism

The project is expected to enhance not only the commercial vibrancy of Santa Tecla and La Libertad but also their cultural and touristic appeal. Safer, cleaner, and more accessible urban spaces will benefit residents, businesses, and tourists alike, creating a more dynamic and inclusive economy.

By investing in local infrastructure, digital modernization, and municipal governance, the IDB loan will help El Salvador achieve a balance between economic growth, social inclusion, and sustainable urban development.