Quid Pro Quo: El Salvador Scores $1.4 Billion IMF Credit by Scaling Back Bitcoin Activities

The International Monetary Fund (IMF) reached an agreement with the government of El Salvador to provide a $1.4 billion credit facility to fund the country’s reform agenda. In exchange, El Salvador agreed to scale back bitcoin’s economic involvement to mitigate risks derived from its implementation.

El Salvador to Receive $1.4 Billion Credit From the IMF, Agrees to Slow Bitcoin Implementation

President Nayib Bukele has reached a milestone in its path to improve the economic standing of El Salvador, securing an agreement with the International Monetary Fund (IMF) that will benefit the country with funds to improve the country’s economy.

Salvadoran authorities scored a $1.4 billion credit facility from the fund, to “address balance of payment needs and support the government’s economic reforms,” according to a press release issued by the IMF. The facility would also include a further push for the country to receive more support from other institutions including the World Bank, the Inter-American Development Bank, the Central American Bank for Economic Integration (CABEI), and the Development Bank of Latin America and the Caribbean (CAF) to receive a combined support of $3.5 billion during 40 months.

The IMF remarked on the Salvadoran economy’s post-pandemic growth and improvement in the country’s fiscal situation, stressing this facility would aim to create the conditions for continued betterment of these variables.

To finalize this deal, El Salvador agreed to reduce the role of bitcoin in its economy, as the IMF had included this as a requirement to pass this credit facility.

The IMF announced two key changes to El Salvador’s bitcoin policy: first, the country will have to change bitcoin’s legal tender status, making its acceptance voluntary via legal reforms. Also, the involvement of El Salvador’s public institutions with bitcoin will be “scaled down,” including purchases, payment of taxes in crypto, and the state’s participation in Chivo wallet, El Salvador’s official crypto wallet.

This last statement hints at a possible stop of the country’s bitcoin purchases, commonly celebrated by Bukele on social media. “Transparency, regulation, and supervision of digital assets will be enhanced to safeguard financial stability, consumer and investor protection, and financial integrity,” the IMF announced.

The agreement’s fine print contradicts recent statements by Bukele’s crypto advisors, who hinted at the possible utilization of the nation’s newfound gold reserves to purchase bitcoin. #Write2Earn