Key Takeaways
- The IMF approved a $1.4 billion loan for El Salvador, with an immediate $113 million disbursement.
- El Salvador’s Bitcoin policy changes include making Bitcoin acceptance voluntary and ensuring taxes are paid in US dollars.
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The International Monetary Fund (IMF) has approved a $1.4 billion extended arrangement for El Salvador under its Extended Fund Facility, with an immediate disbursement of $113 million available to the country.
The 40-month program is expected to attract additional multilateral financial support, creating a combined financing package of over $3.5 billion throughout the program period.
The IMF-supported initiative aims to address macroeconomic imbalances and strengthen governance while boosting El Salvador’s growth prospects.
The program includes measures to improve the primary balance by 3.5% of GDP over three years, primarily through wage bill rationalization while maintaining priority social and infrastructure spending.
“The Salvadorean economy is steadily expanding on the back of robust remittances and tourism, and a greatly improved security situation,” said Nigel Clarke, IMF Deputy Managing Director and Acting Chair. “Nevertheless, El Salvador continues to face deep macroeconomic imbalances, stemming from high debt and weak external and financial buffers.”
The arrangement specifically addresses Bitcoin-related risks, with prior actions including legal reforms making Bitcoin acceptance voluntary in the private sector and ensuring tax payments are made only in US dollars.
The government plans to gradually withdraw from its crypto e-wallet participation, while enhancing digital asset regulation and supervision in alignment with international practices.
“The potential risks of the Bitcoin project are being addressed in line with Fund policies and with Fund advice to the authorities,” Clarke said. “Going forward, program commitments will confine government engagement in Bitcoin-related economic activities, as well as government transactions in and purchases of Bitcoin.”
The program includes improvements to governance and transparency through new anti-corruption legislation and enhanced procurement processes. A plan to increase banks’ liquidity buffers has been approved, with IMF financing supporting government buffers and central bank reserves.
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