El Salvador’s Bitcoin Plans in Tension with IMF Loan Agreement: What’s Next?

On March 4, Salvadoran President Nayib Bukele made headlines with his firm declaration that his government’s Bitcoin purchases would continue, despite a stipulation in El Salvador’s $1.4 billion loan deal with the International Monetary Fund (IMF). The loan agreement, finalized in January 2025, includes a condition that mandates El Salvador declassify Bitcoin as compulsory legal tender and halt the public accumulation of Bitcoin — including government-controlled purchases or mining.

Despite these terms, Bukele publicly reaffirmed his country’s commitment to increasing its Bitcoin reserves, prompting further scrutiny of the government’s relationship with the IMF and the future of its Bitcoin strategy.

The IMF’s Stipulation and Bukele’s Defiance

The IMF’s report, released on March 3, clarified that, as part of the agreement, El Salvador could not continue accumulating Bitcoin through government-controlled entities. The IMF’s exact wording in the agreement stated, “there will be no voluntary accumulation of Bitcoins by the public sector in the context of the program.” However, the day after the report’s release, Bukele responded by stating that Bitcoin purchases would persist. This public defiance sparked debate, especially among Bitcoin advocates, who questioned whether El Salvador was violating the terms of the agreement.

Bitcoin advocate Samson Mow, CEO of Jan3, a Bitcoin adoption advocacy organization, pointed out the apparent contradiction between the IMF’s terms and Bukele’s actions. “These two things seem to be in conflict with one another,” Mow stated on March 5, highlighting the potential tensions between the Salvadoran government’s Bitcoin policy and the IMF’s restrictions.

Despite the public clash, it appears that the recent Bitcoin purchase might not be in direct violation of the IMF deal. According to Reuters, the IMF clarified that the recent increase in El Salvador’s Bitcoin holdings in the Strategic Bitcoin Reserve Fund did not breach the agreement. The IMF had reportedly consulted with Salvadoran authorities about the matter, and the government assured the IMF that the increase was consistent with the agreed terms. The IMF emphasized that the purchase was not considered a breach of the loan’s conditions.

Some commentators, like Unseen Finance, an anonymous finance expert with alleged IMF and investment banking experience, speculated that these recent Bitcoin purchases might be “leftovers” from pre-allocated government funds, potentially set aside before the terms of the IMF deal were fully enforced. This theory suggests that the purchases could be part of a final effort to buy Bitcoin before the April 30 deadline when the new law officially takes effect.

Why Did El Salvador Make the Deal with the IMF?

While the conflict between Bukele’s Bitcoin ambitions and the IMF’s loan conditions has raised eyebrows, the underlying reasons behind El Salvador’s decision to engage with the IMF are important to understand.

As Unseen Finance pointed out, El Salvador approached the IMF for the loan rather than the other way around, making it clear that the Salvadoran government willingly accepted the terms, including the stipulations surrounding Bitcoin. The IMF loan was necessary due to the country’s dire economic situation. El Salvador’s national debt has significantly increased over the last five years, and the country faced mounting fiscal challenges.

John Dennehy, a Bitcoin educator and activist based in El Salvador, emphasized that the country had no choice but to accept the loan to stabilize its economy. Dennehy pointed out that the Salvadoran public remains unaware of the full scale of the country’s mounting debt, largely due to successful government messaging around a debt buy-back strategy. However, the loan from the IMF came with harsh conditions, including the requirement to rescind Bitcoin as legal tender.

The reality of El Salvador’s economic struggles cannot be ignored. Unseen Finance highlighted the country’s ongoing economic difficulties, including rising poverty rates. The government’s decision to engage with the IMF reflects the precarious financial state the country is in, and the IMF loan was seen as crucial to avoid further economic turmoil.

Given the urgency of El Salvador’s economic situation, it’s clear that the government cannot afford to risk violating the IMF agreement. Unseen Finance emphasized that there is no room for ambiguity in the deal with the IMF — any violation of the terms could result in severe repercussions for the country.

The Future of El Salvador’s Bitcoin Policy

As the April 30 deadline approaches, questions remain about how El Salvador will navigate its Bitcoin policy while staying within the confines of the IMF deal. The government’s recent Bitcoin purchases may be a last-ditch effort to accumulate assets before the new law goes into effect, but it’s clear that any future purchases could lead to tensions with the IMF.

Despite Bukele’s defiant rhetoric, it appears that El Salvador has little to gain by directly challenging the IMF over Bitcoin. The loan is essential for the country’s economic stability, and further confrontations could have serious consequences. It remains to be seen how Bukele will balance his Bitcoin ambitions with the IMF’s terms, but the coming months will likely provide more clarity on the future of El Salvador’s Bitcoin strategy.