El Salvador’s IMF Deal Could be Affected By Bitcoin Purchases

ARENA, the largest opposition party in El Salvador, criticized Bukele over the IMF deal. In exchange for $1.4 billion in loans, Bukele agreed to stop using public funds to buy Bitcoin, but he insists that he won’t stop.

ARENA warned that this behavior could scuttle the deal and destroy the country’s economic stability. However, due to recent election losses, the party is more or less powerless to change Bukele’s policy directly.

El Salvador Headed for IMF Showdown

Since El Salvador adopted Bitcoin as legal tender, it’s become one of the world’s largest Bitcoin holders. This has given the country many new economic opportunities, creating new crypto-centric industries as its profits swelled. However, not everyone is happy with this, and the ARENA opposition party is concerned about El Salvador’s IMF loans.

“El Salvador’s economy is in a very delicate state, and this warrants a very responsible and orderly fiscal policy. President Bukele has been emphatic in stating that the purchase of Bitcoin will not stop, despite the agreement stipulating a ban on government purchases of cryptocurrency,” its statement read.

Specifically, the IMF spent years opposing El Salvador’s turn towards Bitcoin. President Bukele cast the nation’s growing BTC stockpile as an economic independence issue; before his Presidency, the US dollar was the nation’s sole currency. However, last October, the IMF began softening its maximalist position.

Specifically, the IMF claimed that El Salvador could get massive new loans if it cut back its support for Bitcoin. The state wouldn’t have to sell its stockpile, but it couldn’t buy more with government money, and BTC would no longer be legal tender. El Salvador was receptive to the deal last December and finally amended its Bitcoin Law in January.

There’s just one problem. Despite receiving a $1.4 billion loan from the IMF, El Salvador hasn’t stopped its Bitcoin purchases at all. Crypto enthusiasts couldn’t identify a loophole in the agreement, but Bukele publicly claimed he would not stop. In other words, it seems like he’s openly defying the IMF. El Salvador has bought Bitcoin every single day since.

Clearly, ARENA doesn’t think this is a good idea. Its statement urged Bukele to honor the IMF agreement, saying that this action is necessary to maintain El Salvador’s economic stability. If there’s a secret clause that lets Bukele buy more Bitcoin for a limited window, his country’s largest opposition party doesn’t seem to know anything about it.

However, even if ARENA detests this plan, it’s not in a good position to do anything about it. It won a little over 5.5% of the vote in last year’s election and currently holds two seats out of 60 in the Legislative Assembly.

Bukele’s party, on the other hand, controls 54, and that’s not counting its coalition partners. In other words, it’s powerless to change the actual policy.

Still, this is very worrying. If El Salvador keeps openly buying Bitcoin, the IMF may retaliate. An open conflict between these two parties would have truly unpredictable consequences. For now, it’s impossible to say what the future may hold.