IMF Mission in El Salvador

An International Monetary Fund (IMF) mission to El Salvador has released a statement focused on supporting the country’s medium-term growth, including policies for reducing risks associated with bitcoin.

“Progress has been made in the negotiations toward a Fund-supported program, focused on policies to strengthen public finances, boost bank reserve buffers, improve governance and transparency, and mitigate the risks from bitcoin,” the IMF statement said on Tuesday.

The UN financial agency stated that policies have been discussed with the Salvadoran authorities to stabilize the nation’s public debt. These include proposals on managing bitcoin as legal tender within the country and the approximately 5,750 BTC (worth $328.6 million at current prices) held by the government.

“On bitcoin, while many of the risks have not yet materialized, there is joint recognition that further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks from the bitcoin project. Additional discussions in this and other key areas remain necessary,” the statement added.

IMF Seeks Agreement on Fiscal Policy with El Salvador

The IMF team added that it is seeking to maintain close engagement with the Salvadoran authorities to reach an agreement on policies that will ensure long-term stability and prosperity.

The IMF’s initial focus is to strengthen the public wage bill while providing space for critical social and infrastructure spending.

Tuesday’s statement said progress has been made on developing a plan to gradually strengthen the nation’s financial system reserve buffers, with efforts to reduce the government’s reliance on domestic financing through potential support from the IMF and other multilateral development banks.

Salvadoran president Nayib Bukele presided over government policy that made bitcoin legal tender in September 2021.