El Salvador to get $1.4 billion from IMF after agreed reforms, including on bitcoin
Adds details on the agreement and background throughout
By Rodrigo Campos
Dec 18 (Reuters) -The International Monetary Fund has reached a staff-level agreement with El Salvador on a new 40-month loan programfor about $1.4 billion and expects additional financing from other multilateral banks for a total of $3.5 billion.
The IMF agreement announced on Wednesday is subject to approval by the fund's board and is also contingent on the implementation of agreed actions by the Salvadoran government, including on its handling of bitcoin, currently a legal tender in the country, but which the IMF has said carries risks.
The IMF pointed to progress in various areas including in security, a narrowing of the current account deficit, falling inflation and a very gradual improvement in government spending.
El Salvador's economy has grown steadily under "robust remittances and a remarkable pick-up in tourism," the fund said.
"Recent liability management operations have substantially lowered near-term financing needs, in the context of sharply lower sovereign spreads," the IMF said.
El Salvador last month launched a voluntary external debt repurchase offer to holders of bonds maturing between 2027 and 2034, and freed up $352 million in October to fund the conservation of the country's main river and its watershed.
"The program is also expected to catalyze additional financial support from the World Bank, the Inter-American Development Bank, and other regional development banks for a combined overall financing package of over $ 3.5 billion over the program period," the IMF said.
BITCOIN RESTRICTIONS
The IMF also cited an agreed reform that will make bitcoin acceptance voluntary to the private sector, while public-sector use of bitcoin will be restricted.
The IMF also said that Salvadoran taxes will only be paid in U.S. dollars, and said the government's involvement in a controversial crypto e-wallet called Chivo "will be gradually unwound."
The IMF and the Salvadoran government have been at odds for years over the country's treatment of the crypto asset as legal tender, alongside the U.S. dollar.
Salvadoran external debt has returned 33% this year at the index level .JPMEGDELSR, according to JPMorgan data, compared to the overall index return of near 7%. Spreads to comparable U.S. debt stand at 386 basis points, down from a peak above 3,500 in mid 2022.
El Salvador's country risk wild ride https://reut.rs/4iUjD9w
Reporting by Rodrigo Campos; Editing by Leslie Adler
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