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The IMF has just approved a $140 million tranche for El Salvador. Not a gift — a transaction. In exchange, the country sacrificed what made it unique: Bitcoin as legal tender, a status it was the first in the world to adopt in September 2021.
El Salvador had been living this experiment for a little over three years. Three years trying to prove that a state could operate with an asset as volatile as Bitcoin alongside the US dollar. The IMF was never convinced. The organization exerted long-term pressure on the volatility of Bitcoin and its potential risks to the country’s public finances. In January 2025, Bukele gave in. Bitcoin loses its legal status. And in December 2024, a framework agreement totaling $1.4 billion is signed. The recently approved $140 million tranche corresponds to the “second and third reviews” of this agreement.
Not yet fully finalized.
The formal approval of the IMF’s board of directors is still pending to actually release these funds. It’s an administrative step, but it matters. El Salvador needs this validation for the money to truly arrive. Meanwhile, the country’s economic figures seem rather solid on paper — growth exceeded forecasts last year, and the IMF sees a 4.5% increase for 2026. Investment is rising, consumption is rising, remittances from the diaspora remain robust, tourism is progressing.
Bukele, Security, and the Social Cost
Nayib Bukele has been in power since 2019. His method is known: a firm hand on security, budgetary austerity, aggressive communication on social networks. Crime rates have dropped dramatically — that’s factual, and it’s what attracts foreign investors and tourists. El Salvador was not known as a safe destination. That has changed.
But the human cost is real. About 15,000 civil servants have been laid off, according to economists. Unions, however, speak of 47,000 jobs lost in the public sector since Bukele’s arrival. There’s a huge gap between the two figures — and the source does not specify which is closer to reality. Both circulate, both are contested.
And despite the growth, about 30% of the population still lives below the poverty line. El Salvador remains one of the countries with the lowest growth rates in Central America in the long term. That’s the Bukele paradox in a nutshell: macro indicators improve, investors return, yet a large part of the population sees little change in their daily lives.
Human rights organizations have also sounded the alarm over the methods used to reduce crime — mass arrests, detention conditions, civil rights under pressure. These criticisms coexist with positive security figures. Not easy to untangle.
Bitcoin Sacrificed, Economy Rewarded
Bitcoin, then. The experiment lasted a little over three years. The initial idea was ambitious: financially include the unbanked populations, attract crypto investors, position El Salvador as a pioneer in a new digital economy. It generated a lot of media buzz. Conferences, visits from crypto figures, a state wallet — the Chivo wallet — launched with great fanfare.
But in practice, adoption by the population remained limited. Many Salvadorans did not use Bitcoin daily. The asset’s volatility made it complicated to pay for a tortilla or rent. And public finances, exposed to an asset that can lose 50% in a few months, worried international creditors. Logical.
So when the IMF set its conditions to unlock $1.4 billion, Bukele’s political calculation was quite direct: $1.4 billion in exchange for abandoning a symbolic status that the population didn’t really use. Bitcoin can still circulate in El Salvador — it is not banned. It is just no longer legal tender. Merchants are no longer required to accept it.
Investors and remittances continued to flow in. The Salvadoran diaspora sends significant amounts each year — it’s a major source of income for the country, and it didn’t depend on Bitcoin’s legal status.
The agreement with the IMF involves broader reforms: budgetary discipline, reduction of public spending, improvement of financial governance. Bitcoin was just one condition among others, even if it was the most visible in the media.
The $140 million currently at stake represents a tranche of a much larger program. El Salvador’s ability to continue unlocking subsequent tranches will depend on its ongoing compliance with IMF conditions — and there, unions and social organizations are closely watching what this implies for public employment and social services.
Thirty percent of the population below the poverty line, 47,000 public jobs lost according to unions, and expected growth of 4.5% for 2026.
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Frequently Asked Questions
Why did El Salvador abandon Bitcoin as legal tender?
The withdrawal of Bitcoin’s legal status in January 2025 was part of the conditions imposed by the IMF to unlock a $1.4 billion loan program, signed in December 2024. The IMF feared that Bitcoin’s volatility exposed Salvadoran public finances to excessive risks.
How many jobs have been cut in El Salvador under Bukele?
Economists speak of about 15,000 civil servants laid off, but unions estimate that 47,000 jobs have been cut in the public sector since Nayib Bukele came to power in 2019.
What is the projected economic growth for El Salvador in 2026?
The IMF forecasts a 4.5% growth for El Salvador in 2026, driven by investment, consumption, remittances from the diaspora, and tourism, in a context of improved internal security.
Why It Matters
The IMF's approval of financial assistance to El Salvador underscores the challenges faced by countries experimenting with cryptocurrency integration into their economies, particularly in light of Bitcoin's volatility. The revocation of Bitcoin's legal tender status signals a significant shift in the country's economic strategy, potentially affecting investor confidence in similar initiatives globally. This development may prompt other nations to reconsider their approaches to cryptocurrency regulation and adoption, influencing the broader market dynamics in the digital asset space.
