IMF and El Salvador Reach Agreement on Bitcoin Clause Consolidation Review
IMF staff and El Salvador authorities have reached a staff-level agreement on the second and third consolidated reviews under the 40-month Extended Fund Facility loan arrangement. If approved by the Executive Board and prior measures are implemented, El Salvador will receive approximately $140 million, equivalent to 101.96 million Special Drawing Rights (SDRs).
This arrangement was approved on February 26, 2025, totaling 1.03392 billion SDRs, about $1.4 billion, equivalent to 360% of the quota. The first review was completed on June 27, 2025. The subsequent second and third reviews were delayed due to pension reform milestones and Bitcoin-related issues. The IMF stated that actual growth in 2025 exceeded expectations, with growth projected at 4.5% in 2026, supported by investment, consumption, remittances, tourism, and capital inflows, while fiscal and external imbalances are being corrected as promised.
The Bitcoin clause is written as verifiable facts. Public participation in the Chivo e-wallet has significantly decreased, with most ownership and operational control transferred to private operators, while the government retains a minority stake and custodial responsibility for customer assets. The Bitcoin accumulation since the first review has been verified as coming from private donations, with no public resources utilized. Authorities have committed to not accumulating more Bitcoin in the future, aside from recorded private donations.
Both parties have reached an understanding on modernizing the legal, regulatory, and supervisory framework for digital assets, as well as strengthening governance and risk management for public sector crypto asset holdings. Ongoing conditions for the project still include: voluntary acceptance of Bitcoin by the private sector, tax payments in USD, and the public sector not issuing or guaranteeing Bitcoin-denominated debt.
The staff-level agreement does not equate to disbursement. Funding still requires approval from the Executive Board and must meet prior actions. For sovereign debt and multilateral budget support, the review has shifted from delays to being votable, shortening the interest rate spread for the "stuck in second review" pricing window; for domestic finances, the $140 million is a small portion of the total arrangement of about $1.4 billion, mainly used to fulfill review timing rather than to fill a gap all at once.
The buyer is the Treasury and central bank reserve account that needs procedural clearance, while the seller is the official creditor that has written Bitcoin risk into loan conditions. The event-driven clarity is that the next disbursement will only open after the completion of the consolidated review. Beneficiaries are sovereign debt and budgets reliant on multilateral funds, while those under pressure are policy paths still wanting to use public funds to increase Bitcoin holdings; private donations have become the dividing line for increasing stock while public balance sheets cannot buy more.
Source: Public Information
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El Salvador designated Bitcoin as legal tender in 2021, and after subsidizing the launch of Chivo, the sovereign spread once exceeded 700 basis points. The staff-level agreement in December 2024 and the Executive Board's approval of the $1.4 billion extended arrangement in February 2025 come with conditions that legal tender status shifts to voluntary, taxes are only collected in USD, and the public sector stops voluntarily buying Bitcoin and exits wallet operations. The first review has granted exemptions for minor defaults and requires a buffer of at least $3 million between public holdings and Chivo customer deposits. Nayib Bukele has tied the national brand to the "one a day" narrative, while the IMF has classified the same asset as a contingent fiscal risk, with both parties resolving conflicts through review timing rather than court.
The capital path is a typical conditional loan in exchange for policy contraction. Funds are allocated from ordinary accounts based on reviews, with about 40% planned for rebuilding reserves; on the Bitcoin side, it requires liquidating the Fidebitcoin trust, publishing audits, isolating customer USD in the central reserve bank, and transferring majority ownership of the wallet to private entities. The accumulation has been reclassified as "private donations, not using public resources," effectively shifting reserve growth from fiscal expenditure to donation categories, allowing on-chain digital increases while superficially not breaching continuous quantitative performance standards. The motivation is that El Salvador needs a qualified stamp to enter international markets, while the IMF needs to prove that the crypto experiment will not turn into a quasi-fiscal hole.
This is analogous to Argentina's repeated use of the IMF as a bridge while telling a different political story domestically, and Ecuador accepting fiscal conditions under dollarization constraints. El Salvador is in a phase of experimental contraction while retaining reserve narratives: payment tools and the national wallet are exiting, while strategic reserve rhetoric remains, and the regulatory framework is required to align with anti-money laundering and consumer protection. The industry position is not a second wave of crypto nationalization but a retreat of sovereign crypto from legal tender to contingent assets.
Structurally, this belongs to regulatory changes. The mechanism is that official creditors remove the new purchase rights of volatile assets from the budget, only allowing donations to enter disclosed addresses; the public sector still holds existing stock but loses the power to increase holdings through taxes and bond issuance. Pricing power shifts from the president's daily purchase announcements to whether the Executive Board can approve the next tranche of Special Drawing Rights. The donation clause is a technical compromise, not a conceptual reconciliation.
ABAB News · Cognitive Law
- Loan conditions can change accounting categories but cannot change asset volatility.
- Donations can increase holdings, but fiscal cannot.
- Review approval sells qualifications, not beliefs.