Caribbean & Central America - March 2026

A recent crash in the value of cryptocurrency bitcoin has caused jitters among investors in Salvadorean bonds and has brought ongoing tensions with the International Monetary Fund (IMF) into sharper focus.

El Salvador’s President Nayib Bukele is a cryptocurrency evangelist who made bitcoin legal tender in the country in September 2021, before rolling back on the move as part of efforts to secure a US$1.4bn financial assistance programme from the IMF [EB-25-04]. Despite also promising to stop acquiring bitcoin using public funds, Bukele’s government has continued to do so, buying one bitcoin per day even though the purchases flout the terms of the IMF agreement signed in December 2024. This had been easier to brush off when the price of the cryptocurrency was rising, as it did from January 2023 until a peak in October last year, but the ensuing crash means that concerns have come to the fore once again.

The value of El Salvador’s bitcoin holdings fell from a peak of around US$800m to around US$500m as of early February, according to calculations by business publication Bloomberg in an article published 12 February. This has had a knock-on effect on the country’s bonds, with unease among investors about continued investments in such a volatile asset increasing concerns around a sovereign default after a run in which Salvadorean debt had provided significant returns.

Bukele’s bitcoin policy is also adding to tensions with the IMF at a time when the two parties are already at odds over delays to a key reform to the Salvadorean pension system, which is required to prevent the pension system from running out of money. Potential measures include raising the retirement age or increasing contributions from employers or workers, and a draft proposal was meant to have been submitted by now, according to the terms of the IMF agreement. The delay has added to investor concerns as the IMF agreement is a key backstop against a sovereign default, and Salvadorean debt becomes a lot less attractive as an investment if the financing agreement is no longer present. 

The IMF is currently conducting a second review of the loan programme. “The IMF may take issue with disbursements potentially being used to add Bitcoin,” Christopher Mejia, an emerging markets sovereign analyst at T Rowe Price, a US investment management firm, told Bloomberg in an article published 12 February. “Bitcoin being down also doesn’t help to ease investors’ concerns.” Jared Lou, who manages the William Blair Emerging Markets Debt Fund, agreed that the continued purchase of bitcoin “does create some potential challenges for the IMF reviews” in an interview with Bloomberg.

Thus far the IMF has remained tight-lipped, saying that discussions around pension reform and bitcoin continue. Talks are “centred on better understanding purchases and on enhancing their overall transparency and governance, in line with programme commitments,” an IMF spokesperson told Bloomberg. However. if the reviews are not completed, the loans will not be disbursed as planned, adding to concerns over the state of El Salvador’s public finances. “The market would react quite poorly if the anchor provided by the IMF were no longer present,” Lou told Bloomberg. 

Looking ahead, the Salvadorean government appears to have no plans to row back on bitcoin purchases. El Salvador’s vice-president Félix Ulloa has said that the government will continue to acquire bitcoin as part of efforts to build up a strategic reserve. The aim is not to generate short-term profits, but rather to prepare the country for possible changes in the international financial system, said Ulloa in an interview with local media outlet ElSalvador.com published 21 February. Although this will raise eyebrows at the IMF, it is possible that the Salvadorean government is banking on the close relationship between Bukele and US President Donald Trump to smooth out any problems, as the US is the IMF’s largest contributor. 

However, this is a high stakes gamble by Bukele, with Bloomberg calculating that El Salvador must make US$450m in bond payments this year, rising to almost US$700m next year, making external financing extremely important. As a result, there are considerable incentives for Bukele to reach an agreement with the IMF and unlock further disbursements under the agreement, although he may be hoping that US pressure helps him to do so without having to give up on his bitcoin gamble.