IMF cools criticism as El Salvador’s Bitcoin play aligns with economic recovery
The International Monetary Fund is recalibrating its message on El Salvador. After years of warning about the country’s embrace of Bitcoin as legal tender, the Fund is now pairing its caution with recognition: growth is stronger, public finances look more disciplined, and the macro outlook has improved even as the government keeps adding Bitcoin to its reserves.
According to recent IMF assessments, El Salvador’s real GDP is now expected to expand by around 4% in 2025, a notable upgrade from earlier projections. The Fund attributes this brighter view to a combination of resilient remittance flows, higher private and public investment, and a marked improvement in domestic security that has boosted confidence and economic activity.
For an institution that once framed El Salvador’s Bitcoin experiment as a threat to financial stability and fiscal sustainability, the shift in tone is significant. Instead of pressing for a rollback of the Bitcoin law, the IMF is now focusing on how the country manages that policy: how transparent it is, how well it protects public finances, and what safeguards it builds around the use of the cryptocurrency.
This more pragmatic posture is unfolding against the backdrop of talks over a roughly $1.4 billion IMF lending program agreed in March 2025. To secure that arrangement, the Salvadoran government has already made important tweaks to the original Bitcoin rollout. One of the most controversial provisions — requiring all private businesses to accept Bitcoin — has been dropped. Merchants can now choose whether to accept the cryptocurrency, addressing one of the Fund’s strongest complaints about forced adoption and potential market distortions.
Another pillar of the compromise is the government’s plan to offload the state-controlled Chivo wallet. By moving toward privatization or an outright sale, El Salvador aims to limit direct public-sector involvement in operating crypto infrastructure. This step is meant to reduce the fiscal and operational risks that come from the state running a large-scale payments app built around a volatile asset.
Yet these concessions have not changed the government’s core stance: it remains a net accumulator of Bitcoin. In November 2025, officials confirmed another purchase that raised national holdings to several thousand coins. While the exact strategy and average purchase price are not fully disclosed, the government presents this accumulation as a long-term reserve diversification play rather than a short-term trading bet.
The IMF’s latest evaluation acknowledges that, for now, macroeconomic dynamics are moving in the right direction. Strong remittances — a lifeline for many Salvadoran households — continue to support consumption and external balances. Improved security has helped revive tourism and encouraged local business formation. Investment in infrastructure and key sectors is picking up, helping to underpin the growth outlook beyond a single year.
As a result, the conversation between the Fund and El Salvador is shifting away from urgent warnings and toward medium-term questions: how to lock in fiscal gains, how to manage debt sustainably, and which structural reforms can lift potential growth. Bitcoin risk is still part of the dialogue, but it is increasingly framed as one component of a broader policy mix rather than the sole defining feature of the economy.
Analysts following the negotiations point out that the current framework essentially ring-fences Bitcoin. The government is still free to hold and promote it, but it must simultaneously meet transparency benchmarks, strengthen tax collection, keep spending in check, and cooperate with international institutions. In other words, the “crypto experiment” is being allowed to coexist with classic IMF-style fiscal conditionality.
This raises a central question for policymakers and investors: can a favorable macro cycle and a Bitcoin rally truly coexist — and even reinforce each other — in a country like El Salvador?
On one level, they already do. El Salvador’s recent macro rebound has not been driven by Bitcoin; it has been driven by better security, stable remittances, infrastructure projects, and tighter fiscal management. But Bitcoin’s presence shapes perceptions. A strong global crypto market can attract additional attention, tourism, and niche investment into the country’s “crypto brand,” potentially amplifying the positive mood and helping the government narrate the recovery as proof its bet is paying off.
However, the inverse is also true. A sharp downturn in Bitcoin prices would test the credibility of that narrative and could put pressure on public finances if the government has marked part of its reserves to market or used them as implicit collateral. Even if the direct fiscal exposure is relatively small compared with total debt, a crash could affect investor sentiment and complicate debt negotiations or market access.
The IMF’s evolving stance suggests it believes the two forces — macro stabilization and crypto risk — can be managed in parallel as long as clear boundaries are in place. Those boundaries include voluntary, not mandatory, use of Bitcoin; a move away from state-operated wallets; transparent reporting of holdings and related transactions; and ongoing commitment to orthodox fiscal and monetary policies.
From the government’s perspective, the coexistence of a Bitcoin strategy with an IMF program serves multiple goals. It preserves the political narrative of technological sovereignty and financial innovation while unlocking access to lower-cost funding and multilateral support. It also creates a test case: if El Salvador can demonstrate that a country may hold Bitcoin on its balance sheet without derailing macro stability, it could influence how other emerging economies think about digital assets in the future.
For citizens and local businesses, the practical picture is more nuanced. With Bitcoin acceptance now optional, most day-to-day commerce still occurs in dollars, limiting immediate exposure to volatility. At the same time, the infrastructure and regulatory carve-outs for Bitcoin create an ecosystem for entrepreneurs, fintech builders, and foreign investors who want to experiment in a relatively small but legally permissive market.
The key risk lies in complacency. As long as growth is robust and remittances flow, it is easier for both the government and the IMF to tolerate some level of Bitcoin-related uncertainty. But if global conditions worsen — for example, if higher interest rates or weaker external demand slow growth, or if remittance flows soften — the tolerance for additional risk could erode quickly. Under such stress, any losses or opacity around Bitcoin reserves would likely receive much closer scrutiny.
There is also a governance dimension. Allowing Bitcoin and macro reforms to proceed side by side only works if institutions are strong enough to maintain separation between political ambitions and prudent financial management. Transparent audits of reserves, clear accounting treatment of crypto holdings, and robust anti-money laundering controls are not optional details; they are what make the model defensible to skeptical creditors and rating agencies.
Looking ahead, the sustainability of this dual-track approach will depend on three main variables. First, whether El Salvador can keep improving its fiscal metrics — narrowing deficits, lengthening debt maturities, and reducing reliance on costly financing. Second, how global Bitcoin cycles unfold, given that prolonged downturns could turn what is currently framed as an upside bet into a persistent drag. And third, whether structural reforms in areas like education, infrastructure, and governance can boost long-term productivity beyond the current growth spurt.
For now, the answer to whether macro tailwinds and a Bitcoin strategy can coexist is cautiously affirmative. El Salvador is showing that a country can integrate a volatile digital asset into its policy mix without immediate macro collapse, provided it builds buffers elsewhere and retains flexibility in implementation. The IMF’s softened rhetoric reflects this reality: the Fund is no longer trying to unwind the experiment, but to fence it in.
Whether this fragile balance evolves into a durable model or unravels in the next global or crypto downturn will determine if El Salvador’s gamble is remembered as a pioneering template or a cautionary tale. In the meantime, the country is living an unusual experiment in economic policy: betting on high-risk digital reserves while being steered, in parallel, along a classic path of fiscal consolidation and structural reform.