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IMF Salvadoran economy review did not include bonds for Bitcoin city


Archive image of President Nayib Bukele. EFE / Rodrigo Sura

San Salvador, Nov 22 (EFE) .- The International Monetary Fund (IMF) said on Monday that the issuance of bonds for the construction of the city of Bitcoin, announced on November 20 by President Nayib Bukele, did not enter into the evaluation. of the economy of the Central American country.
“The plans to issue sovereign bonds and use the resources obtained to buy bitcoin and finance infrastructure plans announced on November 20, happened when the technical work of the mission had concluded and, therefore, they were not discussed with the authorities”, the IMF explained in a statement.
This is the “Declaration of technical staff at the end of the mission of Article IV corresponding to 2021”.
The IMF mission recognized “initiatives to promote financial inclusion, and economic growth,” but warned that “the risks emanating from the adoption of bitcoin as legal tender, the new payments ecosystem and the sale of bitcoin must be controlled. “
He added that “recently announced plans to use the proceeds from new sovereign bond issues to buy bitcoin and the implications of broader trading in the bitcoin market will require a very careful analysis of the implications and potential risks for financial stability. “.
Bukele announced on Saturday night the “bitcoin city” project that will operate in the east of that country, and the issuance of bonds in the bitcoin ecosystem for 1 billion dollars.
RECOMMEND LIMITING THE BITCOIN LAW
The mission also warned that bitcoin “should not be adopted as legal tender” because of the risks it represents, such as its “high volatility”, “great risks to consumer protection, the integrity of the financial system and financial stability. “.
In addition, he indicated that “its use can also cause fiscal contingencies.”
“The mission recommends limiting the scope of the Bitcoin Law and urges to strengthen the regulation and supervision of the new payments ecosystem. As in the case of other electronic wallets, Chivo (government wallet) should be forced to fully insure the funds of the users, in dollars and in bitcoin, “he said.
SECOND GROWTH PROJECTION
The IMF mission indicated that the economy of El Salvador, which fell back 10 years as a result of the pandemic, is expected to grow by 10% in 2021, as recently announced by the Central Reserve Bank (BCR).
He indicated that this would be “thanks to the upward trend in exports, high remittances and public investment.” Economic expansion in 2022 would reach 3.2%.
“Expansive policies, the strong recovery in external demand and the continued growth of remittances are driving a strong recovery,” he said.
However, he indicated that “vulnerabilities are increasing.”
He added that “the increase in gross financing needs, and the uncertainty in the direction of policies since May 2021 (…) increased borrowing costs considerably.”
On that date, the new Legislative Assembly, with a large pro-government majority, took office and its first decision was to dismiss the judges of the Constitutional Chamber of the Supreme Court of Justice and the attorney general.
According to various sectors, including the United States Government, this process took place outside the provisions of the Constitution and the new officials are considered “loyal” to the Bukele Government.
The IMF mission in its statement did not address the situation of the relationship between El Salvador and the United States, whose dialogues have entered a “pause,” according to what the charge d’affaires, Jean Manes, said on Monday.

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