The IMF appeared to soften its stance on El Salvador, saying that risks from bitcoin “have not materialized,” during yearly consultations that have been fiercely critical of the country’s crypto policies in previous years. While the lender reiterated its concern over El Salvador’s adoption of bitcoin as legal tender, it presented more measured recommendations to improve transparency and monitoring.
The IMF’s apparent shift could reflect the slow adoption of bitcoin by Salvadorans and the fact that President Nayib Bukele’s government passed a law regulating the issuance of digital assets by both the state and private entities. Additionally, two rounds of debt buybacks have minimized investor concerns over the Central American nation’s financing sources and fiscal policy in the medium term.
The fund’s full statement highlighted the “full recovery” of El Salvador’s economy to pre-pandemic levels, “driven by the effective government response to the health crisis.” But while real GDP growth for 2023 is projected to be above historical averages at 2.4%, the multilateral lender expressed concern over a rising current account deficit and possible spillover effects from a US recession.