IMF Backs El Salvador’s Economic Progress Amid Growing BTC Tensions

El Salvador's Bitcoin gamble gets a surprise nod from the IMF—just as tensions around the crypto experiment reach a boiling point.

The IMF's Unexpected Endorsement

The International Monetary Fund, long a skeptic of volatile digital assets, acknowledged El Salvador's broader economic strides. The recognition comes despite the Fund's well-documented reservations about Bitcoin's role as legal tender. It's a classic case of praising the macroeconomic management while side-eyeing the monetary policy—a diplomatic tightrope walk if there ever was one.

Bitcoin's Growing Pains

Adopting Bitcoin hasn't been a smooth ride. The move polarized global financial institutions and triggered volatility concerns. Yet, the country pushed forward, building infrastructure and betting on long-term crypto tourism and investment. The tension isn't just external; it's baked into the daily reality of a nation trying to dollar-cost average its way into a new financial system.

The Real Test: Market Cycles

The true measure won't be in IMF reports, but in how the economy weathers Bitcoin's infamous boom-and-bust cycles. Can state-held reserves withstand a prolonged crypto winter? Traditional economists are watching with a mix of horror and fascination—like Wall Street bankers watching a daredevil stunt, secretly hoping it fails to justify their own caution.

El Salvador's experiment remains a high-stakes test case. The IMF's cautious praise changes little; the real verdict will be delivered by the blockchain itself, one volatile market close at a time. After all, in global finance, a pat on the back often precedes the bill.

Economic gains, tighter discipline

The IMF highlighted what it described as a strong commitment by Salvadoran authorities to fiscal consolidation. The government remains on track to meet its end-2025 primary balance target, while the recently approved 2026 budget points to a further reduction in the deficit alongside expanded social spending.

Those efforts, the Fund said, are helping rebuild reserves and reduce domestic borrowing in line with program targets. Structural reforms are also moving forward, including the publication of an actuarial pension study, the adoption of a medium-term fiscal framework, and new financial stability rules aligned with Basel III standards.

El Salvador has approved a new AML and anti-terrorism law, a step the Fund said brings the country closer to a global pattern. Overall, the IMF portrayed an economy finding its footing after years of strain, even as bitcoin continues to sit at the center of an unresolved tug-of-war with international lenders.

Bitcoin under scrutiny

That friction resurfaced over claims about El Salvador’s Bitcoin reserves. Earlier this year, the IMF publicly disputed statements from President Nayib Bukele and the National Bitcoin Office asserting that the government had increased its Bitcoin holdings.

IMF officials said the reported changes reflected wallet reshuffling rather than new purchases, stressing that there had been no increase in official Bitcoin exposure since the country’s loan agreement. Under the EFF program, new public-sector Bitcoin purchases are subject to review, a condition the IMF has repeatedly emphasized due to concerns about volatility and fiscal risk.

Chivo sale and ongoing talks

The IMF statement also noted that negotiations for the sale of El Salvador’s government-run Chivo wallet are “well advanced,” while discussions around the country’s broader Bitcoin project are ongoing. Those talks, the Fund said, are focused on improving transparency, protecting public resources, and mitigating risks tied to crypto assets.

Blockchain data from Arkham Intelligence currently links around $659 million in Bitcoin to government-associated wallets, placing El Salvador among the largest state-level holders globally. Officials in San Salvador continue to frame Bitcoin as a long-term strategic bet, even as everyday use remains limited and most transactions still rely on the U.S. dollar.

A delicate balance

For now, El Salvador’s relationship with the IMF sits in a careful balance. On one hand, macro indicators are improving and reforms are moving ahead. On the other hand, Bitcoin remains a symbolic and practical fault line between the Bukele administration and traditional financial institutions.

As negotiations continue toward completing the second EFF review, the outcome will likely hinge less on ideology and more on disclosure, compliance, and whether El Salvador can keep its Bitcoin ambitions from clashing with the guardrails of its IMF program.

Also read: IMF: Stablecoin Growth May Push Banks Toward Tokenization