LatinNews Daily - 7 August 2024

*The International Monetary Fund (IMF) has said that “progress has been made” in negotiations with El Salvador’s government led by President Nayib Bukele toward an IMF-supported programme, focused on “policies to strengthen public finances, boost bank reserve buffers, improve governance and transparency, and mitigate the risks” from cryptocurrency bitcoin, which the Bukele government adopted as legal tender in September 2021. The statement was made following an IMF mission which has carried out in person and virtual discussions over the past months with the Salvadorean authorities. According to an IMF statement, on the fiscal side, preliminary understandings have been reached on improving the primary balance by around 3.5% of GDP over a three-year period. As regards bitcoin, the IMF says that “while many of the risks have not yet materialised, there is joint recognition that further efforts are needed to enhance transparency and mitigate potential fiscal and financial stability risks from the bitcoin project. Additional discussions in this and other key areas remain necessary.” The Bukele government had previously been in talks with the IMF over a US$1.3bn financial arrangement but these unravelled following the government’s adoption of bitcoin as legal tender due to what the IMF has described as “large risks” associated with using it, “especially given the high volatility of its price”.