IMF Approves $1.4 Billion Credit Facility for El Salvador With Bitcoin Restrictions

The IMF has approved a $1.4 billion credit facility for El Salvador, contingent upon the government’s limitation of bitcoin activities. The initial disbursement of $113 million has been made, with funds allocated over 40 months. President Bukele has begun reforms to comply, yet continues to acquire bitcoin despite the agreement restrictions.

The International Monetary Fund (IMF) has formally approved a $1.4 billion credit facility for El Salvador, a decision that was initially agreed upon informally last year. This agreement aims to enhance the financial standing and growth potential of the Salvadoran economy. However, the administration of President Nayib Bukele is required to limit its involvement in bitcoin transactions as a condition of this financial assistance.

The IMF’s Executive Board has authorized the loan, with an immediate disbursement of $113 million, marking the initial part of the agreement. The remaining funds of the facility are expected to be allocated over the next 40 months. Additionally, this loan is anticipated to attract further financial support for El Salvador, potentially exceeding $3.5 billion.

In a recent press release, Nigel Clarke, the IMF’s deputy managing director and acting chair, acknowledged the progress made by El Salvador in areas such as tourism and personal security. However, he also noted the significant challenges posed by the nation’s high debt levels and fragile financial health, which the new program seeks to address. Regarding bitcoin, Clarke remarked that the risks associated with its adoption would be managed under the proposed measures.

“Going forward, program commitments will confine government engagement in Bitcoin-related economic activities, as well as government transactions in and purchases of Bitcoin,” stated Clarke. This implies that El Salvador may need to restrict its bitcoin purchases to an agreed quantity or cease them altogether.

In accordance with the terms of the agreement, President Bukele has initiated reforms that revise the status of bitcoin in the country, rendering its use voluntary and eliminating the option for citizens to pay taxes using the cryptocurrency. Nonetheless, El Salvador has continued its bitcoin acquisitions, with President Bukele publicly announcing the purchase of 7 BTC after a week of inactivity.

In summary, the IMF’s approval of a $1.4 billion credit facility for El Salvador comes with stringent conditions that will restrict the government’s bitcoin activities. While the loan aims to stabilize and improve the country’s economic situation, it necessitates a reevaluation of its ongoing cryptocurrency strategy. The government’s compliance with these new measures is critical for future financial support from the IMF and other entities.

Original Source: news.bitcoin.com