El Salvador’s Bitcoin Reserves Surpass IMF Loan

With the recent rise of Bitcoin (BTC), El Salvador’s reserves have also soared, reaching an estimated unrealized gain of 58%.

Statistics reveal that the country’s Bitcoin treasury is now valued at between 380 and 400 million dollars, a value that surprised analysts by surpassing the amount of a loan granted by the International Monetary Fund (IMF) four years ago.

In April 2020, the IMF approved a loan of around $389 million to El Salvador as part of an emergency response to the coronavirus pandemic. However, the rapid appreciation of the country’s Bitcoin reserves raises questions about the possibility of El Salvador using the cryptocurrency to pay off this debt.

Renowned venture capitalist Tim Draper praised El Salvador’s strategic investments in Bitcoin, suggesting they could lead to the country’s financial independence, including paying off international debts like the one with the IMF.

El Salvador Bitcoin Reserve

Despite uncertainties regarding a possible agreement with the IMF, El Salvador remains firm in its Bitcoin strategy. President Bukele defends Bitcoin’s economic benefits, citing Bitcoin investment citizenship programs, government-owned mining revenues, and use of the cryptocurrency for government services.

Although Bitcoin has generated significant gains for El Salvador, reserves still represent only a fraction of the country’s total external debt, which exceeds $5 billion.

The possibility of the government turning to Bitcoin as a financing alternative is also raised considering the difficulties that arose for Bukele to agree to reach an agreement with the IMF. One of the organization’s requests is precisely that Bitcoin cease to be legal tender. A measure that the Salvadoran government is not willing to negotiate.

In this sense, the financial company Barclays recalled, in a recent report, the outstanding debt with the IMF since 2020. It highlighted that, in the absence of an agreement on a program, El Salvador must repay more than 300 million dollars in these two years and you have to look for alternatives.

Barclays assures that an El Salvador program with the IMF is increasingly uncertain, due to “contradictory” messages from the Salvadoran government.

“Although logic indicates that we should move forward with a program with the IMF, it appears that El Salvador is not doing so. An IMF program will remain a potential lifeline when funding eventually dries up. For now, El Salvador has minimal financing alternatives, which is what it appears to prefer,” the Barclays report said.

This strategy defies conventional norms of international finance, but for El Salvador, it appears to be a promising bet on a long-term growth asset.