El Salvador has reached a multiplier agreement with the International Monetary Fund (IMF) for an expanded financial support package worth $1.4 billion.
This 40-month agreement aims to address the nation’s fiscal challenges while supporting economic reform and long-term growth.
El Salvador’s IMF Deal Includes Bitcoin, Taxes and Fiscal Reform
Within the framework of the agreement, El Salvador will modify Bitcoin law makes accepting Bitcoin voluntary rather than mandatory for merchants. Taxes will be paid entirely in US dollars, and the government plans to reduce its intervention in the state purse, Chivo.
“The IMF basically went from, “get rid of the Bitcoin Law or don’t,” to “make using your preferred currency officially optional and gradually reduce the application that no one likes.” “El Salvador Got the IMF to Concede to Its Bitcoin Law,” said one user comment.
These adjustments reflect an effort to address IMF concerns about Bitcoin’s volatility and risks.
The country is also committed to implementing important fiscal reforms. They plan to reduce the fiscal deficit to 3.5% of GDP over three years through spending cuts and tax increases. At the same time, El Salvador intends to increase its foreign currency reserves from $11 billion to $15 billion, ensuring greater financial stability.
The IMF has noted the country’s steady economic growth, fueled by strong remittances and a rise in tourism. The agreement aims to improve public finances, promote sustainable development and maintain financial stability.
“Using Bitcoin in El Salvador has always been voluntary and usage has never been higher, continuing to grow. The IMF’s point is nonsense. Chivo is just one of dozens of e-wallets used in El Salvador. Its presence or absence is meaningless. Again, paying taxes in USD? Done, no problem. Saving rates in Bitcoin and using Bitcoin as collateral to buy real estate are booming in ES. El Salvador’s success is due to Bitcoin, not the failed policies of the IMF,” Max Keiser additional.
In securing this agreement, El Salvador’s laws open the door to additional loans from other international financial institutions, potentially bringing total financing above $3.5 billion.
The deal ends four years of negotiations with the IMF, in which Bitcoin’s role in the economy was a key concern. The IMF’s Executive Council is expected to review and approve the deal in the coming weeks. This development represents an important step for El Salvador as it balances economic modernization with financial stability.
