The opposition party ARENA in El Salvador is expressing serious concerns about President Nayib Bukele's ongoing Bitcoin purchases, warning that these actions could jeopardize the $1.4 billion loan agreement with the International Monetary Fund (IMF).
Bitcoin Purchases and President's Stance
Since Bitcoin became legal tender in El Salvador, the government has increased its Bitcoin holdings significantly. Bukele claims this strategy will enhance financial independence. However, critics, including the IMF, have raised alarms about the economic risks associated with this approach.
Risks of Ignoring IMF Guidelines
ARENA's recent statements emphasize the potential dangers of ignoring the IMF's guidelines. The loan agreement with the IMF required El Salvador to cease using public funds for Bitcoin purchases, although it could keep its existing holdings. Nevertheless, the government has continued to buy Bitcoin daily, seemingly disregarding the agreement.
Possible Consequences for El Salvador's Economy
ARENA leaders argue that ignoring the IMF could lead to severe economic repercussions. They stress that following the agreement is vital for El Salvador's financial stability and international support. However, ARENA lacks the political power to challenge Bukele, as his party holds a significant majority in the Legislative Assembly.
This situation leaves uncertainty about the IMF's potential response if El Salvador continues its Bitcoin purchases. If violations occur, the IMF might withhold future assistance, risking broader economic instability in the region.
