Washington, Tuesday, August 13, 2024– The International Monetary Fund (IMF) said Monday it has made progress in talks with El Salvador on a potential economic aid package.
The fund is focusing on fiscal consolidation, strengthening financial reserves, and improving governance.
The Statement by the IMF can be reached here.
While the IMF continues to evaluate the risks associated with El Salvador’s Bitcoin adoption, the Central American nation is also exploring the use of cryptocurrencies for trade with the BRICS nations, a group of emerging economies including Brazil, Russia, India, China, and South Africa. See Separate story here.
This move, aimed at reducing reliance on the U.S. dollar, comes as the BRICS bloc seeks to diminish the greenback’s dominance in global trade.
The IMF said it aims to finalize a program that will benefit the entire Salvadoran population.
El Salvador is grappling with a severe financial crisis exacerbated by its decision to adopt Bitcoin as legal tender in September 2021.
The move, championed by President Nayib Bukele, has led to significant economic instability, with the country’s bond yields soaring and credit ratings downgraded.
In 2023, the International Monetary Fund (IMF) warned of fiscal risks, highlighting the country’s $1.6 billion debt due in 2025.
The government’s reliance on Bitcoin and increasing public debt, which reached over $24 billion in 2023, has fueled investor concerns.
The crisis deepened in mid-2024 when inflation surged to 9.7%, driven by rising global commodity prices and currency devaluation.
Despite the government’s efforts to boost Bitcoin adoption and tourism, the national budget deficit widened to 7.5% of GDP in the first half of 2024.
The IMF and World Bank have urged El Salvador to reverse its Bitcoin policies and focus on more traditional economic measures, but the government remains committed to its cryptocurrency strategy.
Meanwhile, social unrest and protests have intensified as citizens face growing economic hardships, including rising food and fuel prices.
TLDR
IMF is advancing discussions with El Salvador on an economic aid package to address fiscal instability.
El Salvador’s financial crisis deepens as Bitcoin adoption exacerbates economic challenges.
The IMF remains cautious about El Salvador’s Bitcoin strategy while evaluating potential aid benefits for the population.
The International Monetary Fund (IMF) announced progress in its discussions with El Salvador on an economic aid package aimed at fiscal consolidation and strengthening financial reserves. The talks occur amid the country’s financial crisis, worsened by its adoption of Bitcoin as legal tender. While the IMF assesses the risks associated with El Salvador’s cryptocurrency policies, the nation is also exploring trade with BRICS nations to reduce reliance on the U.S. dollar.
