After more than three years of negotiations, the International Monetary Fund (IMF) and the government of El Salvador reached an agreement to grant the Central American country a loan for USD 1.4 billion, within the framework of the Expanded Facility (SAF).
According to the IMF on its official website, the program aims to strengthen the fiscal and external sustainability of El Salvador“through the implementation of an ambitious and growth-friendly fiscal consolidation plan.”
To this end, they plan to execute actions that aim to improve the governance, transparency and resilience of Nayib Bukele’s government, in order to boost the country’s growth potential.
In its statement, the IMF cited some of the obstacles that had delayed the signing of the agreement, among which the declaration of bitcoin (BTC) as legal tender in El Salvador stands out.
On this issue, the organization assures that Both parties will work together, as they pointed out in the statement made last August, when a preliminary agreement was reached.
Risks related to Bitcoin are being mitigated. Acceptance of Bitcoin by the private sector will be voluntary and public sector participation in Bitcoin-related activities will be limited.
Agreement between El Salvador and IMF.
Consequently, the Bukele government agrees to make some changes related to the adoption of digital currency. This would imply making modifications to Article 7 of the Bitcoin Law approved in 2021.
Additionally, it was agreed that taxes will only be paid in US dollars and that the government’s participation in the Chivo Wallet, a bitcoin wallet created by the government, is gradually reduced.
“Transparency, regulation and supervision of digital assets will be improved to safeguard financial stability, consumer and investor protection and financial integrity,” the agency stated.
Bitcoin is not liked by the IMF
As reported by NoticiasVE, the IMF has been pressuring El Salvador to abandon its cryptocurrency policy, arguing that the adoption of the digital currency represents significant risks to the stability and integrity of the financial system.
Hence, he has repeatedly urged the Bukele government to put aside its bitcoin strategy. The president has been firm. Although, due to the need to obtain resources to solve the debt problem that the country faces, it seems that has been willing to make some concessions.
However, the IMF also showed some flexibility, changing its requests to less radical terms, which seek to limit the adoption of BTC, without eliminating the legality of the currency.
What is expected now, after the signing of the agreement, is that the program will be launched next February. The plan is to catalyze additional financial support from the World Bank, the Inter-American Development Bank and other regional development banks.
Bukele himself reacted on social networks by publishing parts of the agreement reached along with emojis about the achievement that has been in the making for more than 3 years.