- El Salvador’s $1.4 billion IMF loan comes with strict conditions, including the reversal of Bitcoin’s status as legal tender.
- The agreement requires increased financial transparency, but concerns remain about corruption and government control over public information.
El Salvador received a long-awaited $1.4 billion loan from the International Monetary Fund (IMF) with a major shift in the country’s financial policies.
Among the preconditions of the deal was the government’s acceptance of repealing Bitcoin’s legal tender status. The reversal, which the Legislative Assembly passed on February 6, 2025, is a U-turn from President Nayib Bukele’s 2021 move to make Bitcoin a legal currency.
The IMF is a long-standing critic of El Salvador’s Bitcoin experiment, arguing it was a risk to financial stability and not well overseen. As part of the new loan agreement, the government also pledged to limit its exposure to Bitcoin-related transactions and to phase out its involvement in the state-controlled crypto wallet.
The IMF’s statement reiterates that Bitcoin use in El Salvador must be voluntary and that the government will no longer actively engage in Bitcoin purchasing.
While the IMF sees this as a step towards tighter economic management, critics of the decision argue that it erodes the original vision of financial independence that Bukele promoted.
El Salvador’s Bitcoin Reversal Comes with New Anti-Corruption Law
Aside from the Bitcoin policy reversal, El Salvador has also initiated new anti-corruption measures to satisfy IMF conditions. The Legislative Assembly has just passed an Anti-Corruption Law, which establishes a National Anti-Corruption Center (CNA) and a system for authorities to file annual wealth and tax statements.
The IMF praised these efforts, stating that they would improve transparency and governance. However, there are still doubts regarding the execution of these policies. The Bukele administration has been accused of restricting public access to governmental financial data since 2019.
It is reported that the transparency system of the country has been disbanded, and asset declarations and public expenditure data are being treated as confidential. The IMF has not indicated whether such records will now be made public again, which calls into question the effectiveness of the new anti-corruption system.
Opposition parties argue that anti-corruption agencies already established were responsible for investigating financial wrongdoing but lacked the political backing to impose accountability.
A report by the Cristosal Anti-Corruption Unit shows that the issue is less the absence of laws than the unwillingness of government institutions to act against corruption.
IMF Deal Ignores El Salvador’s Political Issues
While the IMF deal includes economic reforms, it does not address concerns over El Salvador’s political climate. Since taking office, Bukele has been criticized for eroding democratic institutions and consolidating power.
His administration has dismissed judges, removed an independent attorney general, and replaced officials with loyalists. The moves have stirred fears of the erosion of checks and balances in the country.
Despite these concerns, the IMF has historically dealt with governments regardless of political structures. The organization’s concern remains economic policy and not political governance. For El Salvador, this means financial support will not cease despite recurring reports of human rights violations and suppression of opposition voices.
At the same time, the country is faced with mounting financial obligations. Debt payments alone in 2025 will amount to $1.26 billion, greater than the nation’s healthcare budget. With limited economic growth, El Salvador’s reliance on external financing can only grow, bringing its long-term financial stability into question.