El Salvador's $138 Million IMF Disbursement: The Bitcoin Waiver That Wasn't a Win

After El Salvador's Extended Fund Facility was evaluated for the second and third time, the executive board of the International Monetary Fund approved an immediate payment of about $138 million to the country on October 1.

The verdict released 101.96 million Special Drawing Rights (equal to approximately $137.93 million (using the IMF exchange rate of SDR 1 = $1.352830) under a 40-month plan, about a $1.4 billion scheme that was approved in February 2025.

Payment was accompanied by a waiver. El Salvador broke a continuous performance condition that limited the government sector's ability to voluntarily accumulate Bitcoin.

With its "strong corrective measures and renewed commitments," the IMF offered financial aid. But there are nuances to the reality.

The Donation Loophole

The Bitcoin reserve of El Salvador has grown substantially since the initiative began with the International Monetary Fund.

In February 2025, when the EFF was adopted, the country's Bitcoin holdings were between 5,968 and 6,070 BTC. That amount has increased by more than 1,700 BTC by the end of September 2026, reaching 7,760 to 7,792 BTC. Depending on the exact snapshot used, the current valuation of the reserve ranges from $598 million to $660 million.

Public sector voluntary Bitcoin accumulation is consistently limited to zero in the initial program documents. Assets seized by law enforcement were expressly not included in that definition; however, purchases and mining operations were plainly covered.

In its defense, El Salvador stresses that the new coins did not come from the government but rather from private donations. The claim was supported by the statement published by the IMF staff on September 3, which confirmed that no funds from the government were used.

"No further Bitcoin accumulation is envisaged beyond the documented donations," the board stated in October, adding a new restriction and formalizing the waiver already in place.

This is not meant to be taken as a recommendation in any way. It is a small adjustment in terms of technology.

The IMF has acknowledged the significant transparency gap caused by the categorization of donations.

But this issue of the categorization of the people who donate Bitcoin to a country's government has not been resolved.

These concerns have not been addressed, and the International Monetary Fund has shown its concern by requesting more information about Bitcoin assets held by the public sector.

The Chivo Retreat

Although the Bitcoin waiver is receiving a lot of attention, the real change is the gradual dismantling of El Salvador's cryptocurrency framework by the government.

With the introduction of Bitcoin as legal tender in 2021, the government digital wallet Chivo underwent a major privatization push.

According to the International Monetary Fund, a private operator is now in charge, with the government having a minority interest and the responsibility of safeguarding client assets.

"Residual public-sector exposure should be fully unwound," stated Dan Katz, the First Deputy Managing Director of the IMF, who voiced his acceptance of the transfer.

This is a change from the original plan.

At the time of its inception, Chivo was touted as the go-to platform for Bitcoin transactions in El Salvador.

At first glance, nothing was amiss.

The failure of Salvadorans to use Bitcoin for their everyday transactions was acknowledged by President Nayib Bukele in 2024.

Not only did regulatory demands contribute to the wallet's demise, but there was also a mismatch between the product and the market.

But the state's departure was accelerated by the structural requirements set by the IMF.

Separating state-sector stablecoin operations from private-sector ones, the government has stated categorically that it does not intend to develop or operate any stablecoin wallet.

Macroeconomic Foundation

There is a more basic reason why the IMF is willing to ignore the Bitcoin breach: El Salvador's macroeconomic performance has been strong enough to handle the variance.

In 2025, real GDP growth accelerated to 3.9% from 2.6% the previous year.

Due to factors such as falling remittance growth and the effect of rising oil costs on demand, Fitch Ratings predicts that growth would decelerate to 3% in 2026.

Nonetheless, there is hope for improvements due to private investment momentum and continuing public infrastructure projects.

This year, El Salvador's Central Reserve Bank expects growth to surpass the 2.5% average seen over the prior thirty years, with a range of 3% to 3.5%.

The effort to reduce government spending has advanced.

With a primary surplus of $706 million (1.9% of GDP) in 2025 - a significant improvement from a primary balance of 0% of GDP in 2024 - the non-financial public sector was able to meet the IMF target and show improvement.

In contrast to primary expenditure, which fell by 1.8 percentage points, revenue rose by 0.8 percentage points of GDP due to strong growth and improved tax collection.

From 4.6% in 2024 to 2.9% in 2025, the entire NFPS deficit fell short of the "B" median of 3.1% of GDP.

According to Fitch, the trend of consolidation is expected to persist and reach around 2.4% by 2026.

The national debt remains elevated.

The International Monetary Fund predicts that El Salvador's general government gross debt would surpass the median among "B" countries at 84.5% of GDP by 2026.

The National Flood Insurance Program's debt is expected to decrease from around 90.2% of GDP in 2025 to 87.4% of GDP by 2026 and even further to 85.2% in 2027, according to Fitch.

Interest payments made up 18.1% of revenue in 2025, which was much more than the median of 13.7% for "B" categories.

As pension bond grace periods expire in 2027, this number is projected to rise even further.

Deferred Reforms

The Bitcoin waiver solves a short-term problem, but it does nothing to address the long-overdue structural changes.

Reforming pensions is of paramount importance.

The actuarial assessment that was issued in December 2025 showed that from 2024 to 2070, there would be a system deficit of 59% of GDP in present value terms.

The private sector would contribute 45.4% of this deficit.

It is expected that the Solidarity Guaranty Account, which is in charge of providing minimum pensions, will reach its limit by the year 2029.

By February 10, 2026, the administration has promised to unveil a plan for reform.

There was no proposal before the Legislative Assembly on that date.

By the end of December 2025, the federal government owed pension fund managers a total of $11.24 billion.

Midway through 2026, lawmakers are expected to introduce civil service reform, which aims to simplify the public salary bill and reduce about 1.5% of GDP by 2027.

That was still being thought about in September 2026.

Aligning public sector compensation with qualifications and productivity while preventing needless expansion in employment is the goal of the approach, which is being supported technically by the World Bank.

The political ramifications of these changes are substantial.

With over 90% support and 54 of the 60 parliamentary seats under President Bukele's control, El Salvador is well-positioned for the 2027 election cycle.

Constitutional changes in 2025 extend presidential tenure to six years and make it possible to serve a third consecutive term.

There may be less opportunity for politically contentious changes this year due to the election cycle, according to Fitch.

Energy Wildcard

Energy prices are a short-term financial worry that the markets might not be giving enough attention to.

El Salvador imports a lot of energy, specifically petroleum products, which account for about 6.4% of its GDP. As of April 2026, the price of premium gasoline has risen 21% and surpassed $4 per gallon.

In 2022, the government enacted subsidies and temporary tax relief of 1.1% of GDP in response to a comparable spike in prices.

The government has not announced any plans for similar steps in 2026, but Fitch warns that continuing pressures on energy prices would force a reaction.

The fiscal momentum is starting to lose steam.

The primary surplus for the first quarter of 2026 was $185 million, falling short of the IMF projection of $300 million and 0.3% of GDP.

Although tax income growth remained stable at 9%, current spending increased at a faster rate, reaching 11.4%.

An additional payment equal to half of the monthly income for workers earning up to $1,500, known as "Quincena 25," is the main reason for this increase in spending.

Fitch predicts that in the second half of 2026, with elections approaching and the likelihood of a prolonged oil shock, compliance with IMF targets may become more difficult to achieve.

What the Waiver Actually Means

The IMF has made it clear that they do not support sovereign entities' stockpiling of Bitcoin through the Bitcoin waiver.

El Salvador's macroeconomic policy is usually moving in the predicted direction, and the Bitcoin incident was small enough to be considered inconsequential.

This modification takes both of those factors into consideration. There is still a lot of focus on the donation route.

The accumulation limits will be put back in place if private donors' future contributions to the reserve cannot be clearly identified.

Although it has not specified the verification procedure to be used, the IMF has stated that it will thoroughly investigate the sources of new coins.

According to Bukele, the waiver ensures that the Bitcoin brand remains politically significant, even when the government's engagement in cryptocurrencies becomes less viable.

Chivo was privatized and there was no plan for a digital currency that is backed by the government.

As seen on-chain, the reserve is still there, but it is no longer used as currency but rather as a symbol.

What this means for other countries thinking about using Bitcoin is anybody's guess.

When program-wide success is strong, the IMF has demonstrated flexibility about minor infractions.

Nevertheless, it has also resulted in structural compromises that reduce the role of the state in crypto infrastructure.

No precedent for sovereign entities to freely amass Bitcoin has been established by the waiver. For planned withdrawal, it is a major precedent-setter.