El Salvador and the International Monetary Fund (IMF) have reached a staff-level agreement on the combined second and third reviews of their 40-month Extended Fund Facility (EFF) program. This agreement, once approved by the IMF's Executive Board, will unlock approximately $140 million (101.96 million Special Drawing Rights, or SDRs) for El Salvador. The total EFF program, approved in February 2025, amounts to $1.4 billion (1.033.92 million SDRs).
This disbursement of $140 million is less than the originally anticipated amount for these two reviews, which totaled approximately $275 million (201.04 million SDRs). The delay in reviews, which spanned 15 months, and the combined nature of the current agreement, suggest that El Salvador may have conceded on some initial conditions. However, analyst firm EMFI suggests that the government successfully modified some conditions, particularly concerning Bitcoin and pensions, to unblock the program. The original schedule envisioned additional disbursements, including for a fourth review which is now also delayed.
The IMF noted that El Salvador's economic performance has been strong, with real GDP growth exceeding expectations and projected to reach 4.5% in 2026. This growth is supported by private investment, consumption, remittances, tourism, and capital flows, alongside improvements in security and investor confidence. The program aims to deepen fiscal consolidation, strengthen the pension system, and enhance financial sector regulation and governance. Public participation in the Chivo wallet has been reduced, and no public funds have been used for Bitcoin accumulation; instead, documented private donations have contributed to Bitcoin holdings. The agreement also includes commitments to modernize digital asset frameworks and strengthen risk management for public sector crypto holdings.
Economists, such as Carlos Acevedo, former president of the Central Reserve Bank (BCR), view this agreement as a positive signal for El Salvador, despite the reduced disbursement amount. While the $140 million itself won't cover all the country's financing needs, the IMF's favorable assessment is expected to facilitate access to loans from other multilateral institutions like the World Bank and the Inter-American Development Bank (BID). This improved market perception could lead to more favorable terms for future debt issuance, potentially opening up $4 billion to $5 billion in financing. Following the announcement, Salvadoran bond prices also improved, reflecting increased investor confidence.
