Key Highlights
- IMF projects El Salvador’s GDP growth at ~4% as confidence and investment rise.
- Fiscal consolidation and Basel III reforms are praised, with reserves rebuilding.
- Bitcoin strategy remains contentious, with the IMF disputing claims of new BTC buys.
The International Monetary Fund (IMF) acknowledged improving economic conditions in El Salvador this week, even as disagreements continue over the country’s Bitcoin strategy and the transparency of its reported holdings.
In a staff statement released after months of in-person and virtual discussions, the IMF said negotiations are advancing toward a staff-level agreement on the second review of El Salvador’s 40-month Extended Fund Facility (EFF). According to the Fund, the economy is growing faster than expected, with real GDP projected to reach around 4% this year, supported by stronger confidence, record remittances, and rising investment.
Economic gains, tighter discipline
The IMF highlighted what it described as a strong commitment by Salvadoran authorities to fiscal consolidation. The government remains on track to meet its end-2025 primary balance target, while the recently approved 2026 budget points to a further reduction in the deficit alongside expanded social spending.
Those efforts, the Fund said, are helping rebuild reserves and reduce domestic borrowing in line with program targets. Structural reforms are also moving forward, including the publication of an actuarial pension study, the adoption of a medium-term fiscal framework, and new financial stability rules aligned with Basel III standards.
El Salvador has approved a new AML and anti-terrorism law, a step the Fund said brings the country closer to a global pattern. Overall, the IMF portrayed an economy finding its footing after years of strain, even as Bitcoin continues to sit at the center of an unresolved tug-of-war with international lenders.
Bitcoin under scrutiny
That friction resurfaced over claims about El Salvador’s Bitcoin reserves. Earlier this year, the IMF publicly disputed statements from President Nayib Bukele and the National Bitcoin Office asserting that the government had increased its Bitcoin holdings.
IMF officials said the reported changes reflected wallet reshuffling rather than new purchases, stressing that there had been no increase in official Bitcoin exposure since the country’s loan agreement. Under the EFF program, new public-sector Bitcoin purchases are subject to review, a condition the IMF has repeatedly emphasized due to concerns about volatility and fiscal risk.
Chivo sale and ongoing talks
The IMF statement also noted that negotiations for the sale of El Salvador’s government-run Chivo wallet are “well advanced,” while discussions around the country’s broader Bitcoin project are ongoing. Those talks, the Fund said, are focused on improving transparency, protecting public resources, and mitigating risks tied to crypto assets.
Blockchain data from Arkham Intelligence currently links around $659 million in Bitcoin to government-associated wallets, placing El Salvador among the largest state-level holders globally. Officials in San Salvador continue to frame Bitcoin as a long-term strategic bet, even as everyday use remains limited and most transactions still rely on the U.S. dollar.
A delicate balance
For now, El Salvador’s relationship with the IMF sits in a careful balance. On one hand, macro indicators are improving and reforms are moving ahead. On the other hand, Bitcoin remains a symbolic and practical fault line between the Bukele administration and traditional financial institutions.
As negotiations continue toward completing the second EFF review, the outcome will likely hinge less on ideology and more on disclosure, compliance, and whether El Salvador can keep its Bitcoin ambitions from clashing with the guardrails of its IMF program.
Also read: IMF: Stablecoin Growth May Push Banks Toward Tokenization
