2024-08-08 08:25:44
After three years of negotiations, a mission from the International Monetary Fund (IMF) and the government of El Salvador reached preliminary agreements to strengthen public finances and mitigate the risks of Bitcoin as legal tender.
“Progress has been made in negotiations for a program that could be supported by the Fund, focused on policies to strengthen public finances, reinforce bank reserves, improve governance and transparency, and mitigate Bitcoin risks,” said Raphael Espinoza, who heads the IMF mission, in a statement.
The president of El Salvador, Nayib Bukele, reproduced on the social network X the statement in which the IMF announced the progress of the negotiations.
Since 2021, El Salvador has been seeking an agreement with the financial institution to obtain a loan of 1.3 billion dollars to strengthen the local economy.
One of the points that has stopped the agreement is that in September 2021, at Bukele’s initiative, El Salvador became the first country in the world to legally put bitcoin into circulation at par with the US dollar.
Approximately 88% of Salvadorans will not use digital currency in 2023, according to a survey by the Central American University (UCA).
Regarding Bitcoin, the IMF notes that “while many of the associated risks have not materialized, there is a shared recognition of the need to redouble efforts to improve transparency and mitigate the potential fiscal and financial stability risks of the Bitcoin project.”
“From a fiscal perspective, a preliminary agreement has been reached to improve the primary balance by around 3.5% of GDP over a three-year period, in order to put public debt on a sustainable path,” the financial institution added.
The deal is expected to be achieved through “a balanced set of measures, focusing initially on rationalising the public wage bill, while leaving room for critical social and infrastructure spending.”
El Salvador will make “efforts focused on reducing domestic financing to the government” through fiscal adjustment and financial support that could be offered by the IMF and other multilateral banks, the statement said.
The parties will continue talks until a final agreement is reached.
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© Agence France-Presse
