El Salvador Secures $500M Credit Line from IDB to Combat Flooding in San Salvador

The first $150 million loan is structured with a 23-year repayment term, including a 7.5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR).

In a strategic move to bolster climate resilience and safeguard vulnerable communities, the Inter-American Development Bank (IDB) has approved a Conditional Credit Line for Investment Projects (CCLIP) of up to $500 million for El Salvador. This funding is dedicated to mitigating the impacts of increasingly frequent and intense flood events, particularly in the Metropolitan Area of San Salvador (AMSS), where thousands of residents are at high risk due to inadequate urban drainage and flood management systems.

Initial $150 Million Loan Targets Critical Infrastructure Gaps

As part of this broader credit line, the IDB has also sanctioned an initial individual loan of $150 million. This loan will specifically support a comprehensive flood mitigation project in the AMSS, where dense population centers face recurring threats from heavy rains that result in significant loss of life, property damage, and economic disruption.

The AMSS’s vulnerability stems from multiple factors:

• Lack of adequate urban drainage systems

• Poor technical and urban planning capacity

• Inadequate early warning systems

• Deficiencies in solid waste management, which frequently blocks existing drainage channels

This initial investment aims to directly confront these challenges by financing urban drainage infrastructure development and maintenance. Planned interventions include:

• Construction of detention ponds to temporarily hold stormwater

• Rehabilitation of sustainable urban drainage systems

• Recovery and strengthening of culverts and underground vaults, which manage water discharge during heavy rain

• Maintenance and operation mechanisms for long-term sustainability of drainage assets

Direct and Indirect Benefits for Households and Businesses

The program is designed to have both direct and indirect impacts on the region. Specifically:

• 15,200 people across 5,100 households will benefit directly from improved drainage infrastructure

• Around 700 establishments, including businesses and public institutions, will gain access to flood protection and operational continuity

Beyond these direct beneficiaries, the project’s investment in early warning systems and community engagement is expected to touch the lives of 100% of the AMSS population. Enhanced alert protocols and awareness campaigns will improve disaster preparedness citywide.

Focus on Capacity Building and Institutional Strengthening

In addition to physical infrastructure, the project prioritizes institutional strengthening. A key component involves building the capacity of El Salvador’s Ministry of Public Works and Transportation, which plays a central role in urban flood management. The initiative includes:

• Technical training for personnel

• Development of operational protocols

• A certification program through which 70% of workshop participants are expected to achieve credentials in urban drainage management and early warning systems

Financial Terms and Sustainability

The first $150 million loan is structured with a 23-year repayment term, including a 7.5-year grace period, and an interest rate based on the Secured Overnight Financing Rate (SOFR). These favorable terms align with the project’s long-term nature and El Salvador’s broader fiscal sustainability goals.

By establishing the CCLIP, the IDB not only enables this initial project but also opens the door for future investments in flood risk reduction across other vulnerable urban areas in the country. This flexible and scalable approach ensures El Salvador can continue addressing climate-related urban challenges with support from multilateral partners.

The initiative marks a significant step forward in building a safer, more climate-resilient San Salvador, with ripple effects expected across urban governance, infrastructure development, and disaster preparedness.