《Financial Times》: El Salvador to scale down Bitcoin plan to secure $1.3bn IMF deal

BlockBeats News, December 9th, according to the Financial Times, El Salvador is expected to reach an agreement with the International Monetary Fund (IMF) in the next two to three weeks, according to two people close to the negotiations, to obtain a $1.3 billion loan program as part of an exchange for its groundbreaking use of Bitcoin as legal tender and government deficit reduction.

An IMF mission team has arrived in San Salvador to finalize the details of the agreement with the Salvadoran government. Sources said that the agreement expected to be reached will unlock an additional $1 billion loan from the World Bank and a $1 billion loan from the Inter-American Development Bank, which will be provided over the next few years. An IMF spokesperson declined to comment, stating that it is not IMF policy to comment on ongoing negotiations.

This loan package will require approval from the IMF board of directors. If approved, it would signal this Central American country's re-entry into the international financial system after several years of relative isolation. This move comes after the country passed a law in June 2021 making it the world's first country to adopt Bitcoin as legal tender.

The IMF had previously opposed El Salvador's adoption of this digital currency, stating that it posed risks to financial stability and integrity, and urged the Bukele government to stop using cryptocurrency as legal tender.

Under the terms of the agreement reached with the Washington-based Fund, El Salvador will forgo the legal obligation for businesses to accept Bitcoin as a form of payment and instead make it voluntary.

The Salvadoran government will also commit to reducing the budget deficit by 3.5 percentage points over three years through spending cuts and increased tax revenues, advancing this plan through an anti-corruption law and measures to increase foreign exchange reserves from $11 billion to $15 billion.