El Salvador Secures $1.4 Billion IMF Loan Under 40-Month EFF, Scales Back Bitcoin Strategy and Chivo Wallet

Dec 18, 2024, 10:01 PM

El Salvador has reached a staff-level agreement with the International Monetary Fund (IMF) for a $1.4 billion loan under a 40-month Extended Fund Facility (EFF) arrangement after four years of negotiations. The agreement, which is subject to approval by the IMF's Executive Board, aims to support the government's economic reforms and strengthen fiscal and external sustainability. In exchange for the loan, El Salvador has agreed to scale back its Bitcoin strategy, making acceptance of Bitcoin voluntary for the private sector and limiting public sector involvement in Bitcoin-related activities. The government will also gradually reduce its role in the Chivo digital wallet program. The deal is expected to unlock additional funding from development banks, potentially bringing the total financing package to over $3.5 billion. El Salvador's debt, which peaked at 85% of GDP in 2024, will be addressed by improving the primary balance by about 3.5% of GDP over three years. Meanwhile, taxes will continue to be paid in U.S. dollars.