The International Monetary Fund (IMF) has announced significant progress in negotiations with El Salvador, which could lead to the implementation of a financial support program that would transform the Central American country's finances.
This progress comes after months of discussions between an IMF mission and Salvadoran authorities, led by President Nayib Bukele.
Despite the challenges, including the risks associated with adopting Bitcoin as legal tender in El Salvador, it appears that both sides are willing to find common ground to move forward in such negotiations.
IMF shows more flexibility towards El Salvador's Bitcoin policy
El report The IMF’s report, published on August 6, highlights the urgent need to address the country’s macroeconomic imbalances. The IMF mission to El Salvador has reportedly worked closely with government authorities to identify policies that could be supported by a Fund program, with the aim of strengthening public finances and improving long-term economic resilience.
Among the main agreements reached is the intention to improve the primary balance of the Gross Domestic Product (GDP) within a period of three years, in order to place the public debt on a sustainable path. According to the organization, fiscal consolidation will be achieved through a balanced set of measures, which will include the rationalization of public spending and the protection of critical investments in infrastructure and social programs.
On the other hand, regarding Bitcoin, which has been at the center of controversy between the IMF and El Salvador since the country announced its decision to make the cryptocurrency official currency, the organization indicated that, although it remains a sensitive issue, many of the risks feared with Bitcoin have not materialized.
“As for Bitcoin, while many of the risks have not yet materialized, there is a common recognition that further efforts are needed to improve transparency and mitigate potential risks to the fiscal and financial stability of the Bitcoin project.”, the IMF said.
These statements, according to several experts, suggest that Bitcoin is no longer an obstacle to reaching a financial agreement with the IMF and that the parties have begun to smooth things over on this issue. All of this could pave the way for a more robust agreement between the country and the United Nations international financial organization.
El Salvador committed to the development and future of Bitcoin
The Bukele government has maintained a firm stance in its support for Bitcoin, despite warnings from bodies such as the IMF. Since its adoption as legal tender in 2021, the cryptocurrency has become a a pillar of the government's economic strategy, which seeks to attract foreign investment and improve the country's trade balance.
Bitcoin-related projects include issuing cryptocurrency-backed bonds and mining Bitcoin using geothermal energy from the country's volcanoes. El Salvador also has plans to build a cryptocurrency-focused metropolis, which will be named bitcoin city and will become the center of global hyperbitcoinization.
Regarding El Salvador's plans with Bitcoin, the IMF has stressed the need to improve transparency to mitigate the financial risks associated with the cryptocurrency. It also acknowledged that, although many of the risks have not yet materialized, it is crucial to establish a regulatory framework that protects consumers and guarantees economic stability.
As such, discussions about Bitcoin and its role in the Salvadoran economy will continue to be a focal point in future negotiations between El Salvador and the IMF, the organization stressed, noting that the path to a sustainable financial agreement seems clearer than ever.
