El Salvador will limit its bitcoin purchases, says IMF
The International Monetary Fund (IMF) has given the green light to a new 40-month agreement under the Extended Fund Facility (EFF) for El Salvador, granting the country $1.4 billion in financing. The decision, approved today by the IMF's Executive Board, is conditional on the South American country's government restricting state transactions with bitcoin (BTC) and gradually disassociating it from the public sector.
According to a report published by the international organization and shared on X by President Nayib Bukele, the Central American nation will receive an immediate disbursement of 113 million dollars. The plan aims to strengthen public finances, rebuild external reserves and "address the risks associated with the Bitcoin project," while fostering more inclusive economic growth.
The IMF-backed program comes at a crucial time for El Salvador, whose economy is showing signs of recovery driven by remittances, tourism and a notable improvement in security. However, challenges such as high debt persist.
According to the IMF, the government of Nayib Bukele is committed to improving the primary balance by 3.5% of GDP in three years, rationalizing spending on public salaries without neglecting priority social investments and infrastructure. “The objective is to put public debt on a downward path and create conditions for sustained growth,” said Nigel Clarke, acting deputy managing director of the IMF.
The central axis of the agreement is to mitigate the risks of the experiment with Bitcoin that El Salvador began in 2021. Among the measures, the IMF highlights legal reforms, but especially limiting government transactions of digital assets and limiting public purchases of Bitcoin.
“This will be complemented by measures to rebuild reserve buffers and reinforce financial stability, as well as actions to strengthen fiscal transparency and anti-corruption and anti-money laundering and countering the financing of terrorism (AML/CFT) frameworks. The program also addresses risks arising from the Bitcoin project, including by making Bitcoin acceptance voluntary and limiting public sector involvement in Bitcoin-related activities and in Bitcoin transactions and purchases.”
The IMF in its report.
The program also includes reforms to increase transparency and combat corruption, with initial steps including a new anti-corruption law and the publication of government audits by the Court of Auditors. This is complemented by plans to strengthen the anti-money laundering framework and improve financial stability through increased bank reserves and new legislation.
According to the IMF statement, the authorities committed to:
Make acceptance of bitcoin by the private sector voluntary.
Limit bitcoin transactions and purchases by the State, confining its use to the public sector.
Progressively dismantle government participation in the state-owned digital wallet Chivo.
Ensure that taxes are only paid in dollars, not in bitcoin or cryptocurrencies.
News in development…$BTC