IMF Boosts El Salvador with $138 Million Payment
El Salvador has received a substantial boost from the International Monetary Fund (IMF) with an immediate payment of approximately $138 million. This disbursement follows the completion of two reviews of the nation’s $1.4 billion Extended Fund Facility program, during which the IMF granted exemptions for some unmet conditions, including a stipulation pertaining to Bitcoin. The IMF’s Executive Board finalized these reviews on October 1, 2023, and released SDR 101.96 million as part of the arrangement, translating to a payout valued around $138 million, although Bloomberg reported the amount slightly higher at $139 million.
Bitcoin Accumulation Restrictions
Initially, the IMF had imposed a continuous restriction on the Salvadoran government’s ability to voluntarily amass Bitcoin, defining this accumulation to include both purchases and mining, while exempting assets gained through law enforcement actions like seizures. However, a breakthrough occurred in September when both the IMF and El Salvador’s authorities reached a consensus regarding Bitcoin holdings traced to government-controlled wallets. Documentation from El Salvador indicated that the additional Bitcoin came from private donations rather than public funds, addressing earlier concerns about state accumulation limits that seemed to be violated after an agreement to restrict such actions.
Nevertheless, the recent board decision does not reinstate any government-sanctioned Bitcoin purchases. Instead, the IMF is now anticipating that no further Bitcoin accumulation will occur beyond the already documented sources of donations. This statement reinforces a forward-looking stance tied to the current agreements between the parties involved. Previous reports highlighted minor breaches of the Bitcoin accumulation rules, particularly with fluctuations in balances for Chivo wallet customers. Yet, the latest board documentation implies that these earlier discrepancies alone don’t justify the newfound waiver.
Broader Economic Conditions and Legislative Changes
Beyond Bitcoin regulations, the IMF’s program encompasses broader economic conditions for El Salvador. A key requirement involved reducing the government’s role in the Chivo digital wallet system, which was introduced as part of El Salvador’s ambitious Bitcoin initiative. By September 2023, the ownership and operational control of Chivo had shifted predominantly to a private entity, leaving the government with only a nominal stake and custodial duties regarding customer assets. However, the IMF now urges the complete dismantling of any remaining state ownership.
El Salvador’s legislative adjustments have already altered the original Bitcoin Law, eliminating the requirement for businesses to accept Bitcoin while also mandating taxes to be settled in U.S. dollars. This legislative shift is part of the reforms underpinning the IMF’s program and aligns with the ongoing negotiations concerning the Chivo wallet.
Economic Recovery and Future Outlook
The payout was deemed timely as the IMF reported that El Salvador’s economic recovery is surpassing previous expectations. The Fund forecasts a real GDP growth of approximately 4.5% in 2026, following a 3.9% increase in 2025, supported by bolstered investment, private spending, and heightened remittances and tourism. The board emphasized that peace and investor confidence have contributed significantly to enhancing economic activity.
Importantly, the IMF noted that while the liquidity and reserve benchmarks have been successfully achieved, it still encourages El Salvador to sustain fiscal reforms. Delays have been noted in implementing pension and civil service reforms, alongside a need for stricter fiscal control and enhanced revenue management.
Ongoing Scrutiny and Regulatory Framework
Under the ongoing program, the IMF insists on heightened scrutiny of El Salvador’s Bitcoin holdings, requiring robust reporting on crypto assets managed by public entities and ensuring that exposure to Bitcoin remains strictly limited to verifiable donations. Furthermore, the IMF plans to reinforce regulations concerning the digital asset sector and seeks amendments to the Digital Asset Issuance Law of El Salvador to solidify a comprehensive regulatory framework. As negotiations move forward, authorities are expected to finalize the unwinding of any public sector involvement in Chivo and enhance the governance standards for crypto services altogether.
