IMF Loans IDR 22.4 Trillion To El Salvador, The Condition Is That Bitcoin Rules Must Be Overhauled

JAKARTA - El Salvador, a small country in Central America known for its bold policy of using Bitcoin as a legal tender, now has to face the bitter pill.

After four years of negotiations with the International Monetary Fund (IMF) over a planned USD 1.4 billion loan plan, the country's government has finally officially received a loan. However, this agreement has conditions that force El Salvador to reshuffle their Bitcoin policy which has been their pride.

According to the IMF, if this deal is approved, El Salvador will change some rules related to Bitcoin. One of the most prominent is the decision to use Bitcoin as a voluntary tender for the private sector.

The IMF urges El Salvador not to require the use of Bitcoin as it has previously implemented. El Salvador legalizes Bitcoin as the official currency in 2021. In addition, the government will also limit the involvement of the public sector in crypto transactions and reduce the role of the Chivo digital wallet launched by the government.

This change is part of efforts to support macroeconomic adjustments and the structural reforms needed to maintain the country's financial stability. The agreement with the IMF also includes a number of steps to strengthen the anti-corruption legal framework and align banking regulations with international standards. This is expected to improve financial governance and improve El Salvador's economic stability.

Launching Decrypt, IMF Deputy Director Luis Cubeddu explained that these measures would reduce the risks associated with the Bitcoin project, in line with the IMF policy. El Salvador's move to make Bitcoin a legal currency had indeed been in the spotlight of the international community.

However, the policy also faces many obstacles, both in terms of volatile crypto markets and from within the country that see it as a risky measure. In return, if El Salvador overhauls Bitcoin policy, the IMF promises the country to fund additional international development banks to reach more than 3.5 billion US dollars (approximately IDR 56 trillion).

However, to get these funds, the government of El Salvador must reform the domestic economic sector, including improving the budget deficit and dealing with state debt which has reached 85% of GDP by 2024.