- IMF Reaches Staff-Level Deal on El Salvador Reviews, Unlocking Potential US$140.00m Disbursement
The International Monetary Fund has reached a staff-level agreement with El Salvador on the combined second and third reviews of the country’s 40-month Extended Fund Facility, moving the government closer to a further US$140.00 million disbursement as stronger-than-expected growth and progress on fiscal and structural reforms support the programme.
The agreement remains subject to approval by the IMF Executive Board and completion of agreed prior actions. If approved, El Salvador would receive SDR 101.96 million, equivalent to about US$140.00 million, under an arrangement originally approved in February 2025 with total access of approximately US$1.40 billion.
The Fund said the programme was producing positive results, with economic activity outperforming earlier expectations while fiscal and external imbalances were being reduced in line with programme commitments. Structural reforms are also advancing, including changes to the government-backed Chivo digital wallet and the treatment of public-sector Bitcoin holdings.
Rodrigo Valdés? Wait user says Mr. Torres, Mission Chief for El Salvador. Need preserve source. Let’s phrase Mr Torres. The IMF mission chief for El Salvador, Mr Torres, said real GDP growth exceeded expectations in 2025 and is projected to reach 4.50% in 2026, supported by investment, private consumption, remittances, tourism and capital inflows.
The Fund linked those gains partly to improvements in security and investor confidence, alongside what it described as prudent macroeconomic policies aimed at rebuilding fiscal and external buffers. It also said the programme was contributing to a significant decline in poverty, supported by improvements in the efficiency of public services.
The growth performance is important because El Salvador is attempting to consolidate public finances without derailing domestic demand. Stronger economic activity gives the government more room to improve revenues and debt dynamics, but the IMF is making clear that continued fiscal adjustment remains central to the programme.
The non-financial public sector primary surplus is expected to strengthen from 2.90% of GDP in 2026 to 3.70% in 2027. That path is intended to support the government’s Fiscal Responsibility Law objective of reducing the public debt-to-GDP ratio to 80.00% by 2030.
The fiscal strategy will rely on continued expenditure restraint and improvements in revenue administration while preserving room for infrastructure and social spending. The balance is politically important because aggressive consolidation can weaken public support if it is perceived as coming at the expense of essential services or investment.
Pension reform is another significant part of the programme. The government is expected to recognise liabilities arising from the end of the grace period on interest payments owed to private pension funds and to enact a parametric pension reform in line with IMF recommendations next year.
A civil-service reform is also being prepared, with the stated objective of improving the efficiency and quality of public-service delivery while supporting longer-term fiscal sustainability. Together, the pension and civil-service measures indicate that the programme is moving beyond short-term deficit reduction towards structural changes in public expenditure.
Reserve and liquidity buffers have also become a focus after exceeding programme targets. The IMF said the authorities would continue strengthening reserves while advancing reforms to financial-sector regulation, crisis-management frameworks and the institutional and financial position of the Central Bank.
That emphasis reflects the Fund’s broader concern with resilience rather than growth alone. A stronger economy can still remain vulnerable if reserve coverage is weak or if the financial system lacks credible tools for managing stress.
Governance reforms are also expected to deepen. The authorities have committed to improving the anti-money-laundering and counter-terrorist-financing framework, publishing asset declarations of high-level public officials and strengthening public financial reporting, beneficial-ownership transparency and accountability institutions.
These reforms are central to the IMF’s assessment because fiscal adjustment without stronger governance can leave public finances exposed to leakages and weaken investor confidence. The programme is therefore combining traditional macroeconomic conditions with institutional reforms intended to improve transparency and oversight.
Bitcoin remains one of the most closely watched elements of El Salvador’s IMF programme. The government’s earlier decision to adopt Bitcoin as legal tender had become a major point of contention with multilateral lenders, given concerns about fiscal exposure, financial integrity and the use of public resources.
The latest agreement suggests a significant reduction in direct public involvement. Majority ownership and operational control of the Chivo e-wallet have been transferred to a private operator, while the government has retained a minority stake and custodial responsibilities for customer assets.
The IMF also said documentation had been provided showing that Bitcoin accumulation since the first review reflected private donations and that no public resources were used. The Fund and the authorities have agreed that no further Bitcoin accumulation is expected beyond those documented donations.
That clarification is significant because it narrows the potential fiscal exposure associated with crypto-asset accumulation. The authorities also agreed to modernise the legal, regulatory and supervisory framework for digital assets and strengthen governance and risk-management arrangements for public-sector crypto holdings.
The Fund’s approach appears to be shifting from opposition to public-sector Bitcoin expansion towards containment, transparency and risk control. Rather than attempting to reverse every element of El Salvador’s digital-asset strategy, the programme is focusing on limiting public financial exposure and improving oversight.
The transfer of Chivo’s majority ownership to a private operator is therefore more than an operational change. It represents a reduction in direct state participation in one of the most controversial parts of El Salvador’s Bitcoin experiment.
For investors, the combination of stronger growth, improving fiscal balances and greater clarity around Bitcoin policy could support confidence. But the programme still faces difficult tests, particularly around debt reduction, pension reform and the durability of fiscal consolidation.
The 2026 growth projection of 4.50% is supportive, but the IMF’s broader message is that current momentum should not be treated as evidence that structural vulnerabilities have disappeared. Strong programme ownership and timely implementation of reforms remain essential if the country is to reduce debt and strengthen resilience.
The Extended Fund Facility was approved by the IMF Executive Board on February 26, 2025, with total access of SDR 1,033.92 million, or about US$1.40 billion, equivalent to 360.00% of quota. The first review was completed on June 27, 2025, and SDR 172.32 million has been disbursed so far.
The current staff-level agreement therefore represents an important checkpoint rather than the end of the reform process. Executive Board approval would release additional financing, but the Fund’s continued support remains tied to implementation across fiscal, financial, governance and digital-asset reforms.
El Salvador’s economic story is consequently entering a more demanding phase. The immediate crisis-management questions are giving way to a test of whether faster growth can coexist with sustained debt reduction, stronger institutions and a reduced fiscal role for Bitcoin.
The IMF’s latest assessment is encouraging, but the programme’s success will ultimately depend on whether the current gains become durable enough to survive weaker external conditions, slower inflows or renewed financial pressure.
