After four years of negotiations, El Salvador reached a $1.4 billion loan agreement with the International Monetary Fund (IMF) on Wednesday. But the deal may not be as sweet as it seems.
The UN statement indicated that El Salvador would have to scale back some aspects of its Bitcoin strategy if the provisions of the agreement are approved.
Those were the initial details of the deal. It was announced At the beginning of this month, according to earlier sources Decrypt The plan focuses on “supporting macroeconomic adjustments and structural reforms.”
Under the new agreement, El Salvador will make Bitcoin acceptance voluntary for the private sector and limit the public sector's involvement in crypto activities. The government will gradually reduce its role in the Chivo digital wallet program.
The agreement outlines a comprehensive reform agenda, including measures to strengthen anti-corruption frameworks and improve financial stability and governance by aligning banking regulations with international standards.
IMF Deputy Director Luis Cubedo and Head of Mission Rafael Espinoza said in a statement that “the risks to the Bitcoin project will be significantly reduced in accordance with the Fund's policies.”
The agreement is expected to unlock additional funding from development banks, which could bring the total financing package to more than $3.5 billion.
El Salvador needs to implement several economic reforms to get the money. These include improving the primary balance by about 3.5% of GDP over three years to address the country's debt, which will rise to 85% of GDP by 2024.
Meanwhile, the country's taxes are still paid in dollars and its government plans to introduce reforms to transparency and control of digital assets.
The IMF's executive board is expected to review the program by early February to ensure El Salvador implements the agreed reforms.
Bitcoin in El Salvador
When the president of El Salvador, Naib Bucale, announced that the country would do it in 2021 Taking Bitcoin as legal tenderresponses have been mixed. Bitcoiners were really bullish on the idea, even though some recognized the sentiment He was forced.
The move triggered a credit crunch and warnings. Moody's And Fitch ratings.
Financial institutions such as the World Bank and the IMF have issued negative comments.
Citing environmental concerns, the World Bank rejected El Salvador's request for assistance in implementing a Bitcoin law.
In early 2022, the IMF made a call El Salvador to stop using Bitcoin as legal tender. The fund They confirmed again The position in October of this year.
The country's Chivo wallet program, launched with a $30 bitcoin incentive that attracted more than 3 million subscribers, has seen limited long-term adoption.
In early August, President Bukele He admitted The program, along with the country's adoption of Bitcoin, was less widespread than the regime had hoped.
Edited by Sebastian Sinclair.
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