IMF and El Salvador discuss Bitcoin risk strategies

The International Monetary Fund (IMF) is in talks with El Salvador to address macroeconomic and financial concerns related to Bitcoin (BTC).

These talks aim to create a comprehensive plan to manage risks while keeping El Salvador's economy stable and growing while using Bitcoin as legal tender.

Focus on Fiscal Stability: The IMF Plan with El Salvador

In the year On August 6, the IMF issued a statement outlining the progress made in the ongoing negotiations. An IMF mission led by Rafael Espinoza engaged in physical and virtual discussions with Salvadoran officials.

The talks focused on strengthening government finances, improving bank reserves and increasing transparency. The IMF urged El Salvador to improve its primary balance by about 3.5% of GDP within three years. This plan involves better managing public wages while still spending on essential social services and infrastructure.

Progress has been made in preparing a plan to gradually strengthen the reserves of the financial system in line with private sector credit and growth. This is supported by possible support from the Fund and other multilateral development banks in an effort to reduce the government's dependence on domestic financing, the IMF added.

Read more: How to buy Bitcoin (BTC) and everything you need to know

The IMF and El Salvador have acknowledged the potential fiscal and financial stability risks from the Bitcoin project. Although many risks have not yet been implemented, both sides agree that more efforts are needed to increase transparency and reduce potential problems. These efforts include developing legislative proposals to address corruption, illicit financial flows, and procurement vulnerabilities.

El Salvador adopted Bitcoin as legal tender in September 2021 under the leadership of President Naib Buquel. The IMF has previously warned that this move could raise macroeconomic, financial and legal issues. Despite these concerns, the Salvadoran government remains committed to its Bitcoin strategy.

Earlier this year, President Buckel announced plans to implement a dollar cost averaging (DCA) strategy by buying one bitcoin per day. This approach aims to continuously accumulate bitcoins regardless of market conditions.

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Despite the market volatility, El Salvador continues to buy Bitcoin. The Bitcoin Office Mempool shows that the country holds 5,835 BTC, worth an estimated $334.04 million at the current market value.