El Salvador plans the world's first "bitcoin city" 1:00
(CNN Spanish) -
The International Monetary Fund (IMF) made public this Monday the results of the technical mission that visited El Salvador. There it includes successes, recommendations such as not using bitcoin as legal tender and some warnings, such as the possible growth of public debt above 95% of Gross Domestic Product (GDP) by 2026 due to the “absence of decisive policy measures. economic to correct fiscal imbalances and alleviate these limitations to growth ", according to the document published on the website of the international financial organization.
The IMF recognizes that these projections do not include plans to issue sovereign bonds and use the resources obtained to buy bitcoin and finance infrastructure plans, in reference to the announcement to build the Bitcoin City within ten years, a project that the Government of El Salvador estimates US $ 1 billion, according to the President of El Salvador, Nayib Bukele, on Saturday.
Nayib Bukele announced the construction of a bitcoin city in 2022
The financial organization considers that the use of bitcoin as legal tender implies "great risks" due to its high volatility, therefore it suggests "limiting the scope of the law" and "it is urgent" to strengthen the regulation and supervision of the payment system. .
The government of El Salvador said it did not agree with this assessment.
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Recommendations in the face of the crisis
The IMF indicates that it has suggested to the government measures such as an increase in taxes on goods and services, targeting of subsidies and aligning public salaries comparable to those of the private sector.
According to the multilateral body, if these suggested measures are implemented, fiscal sustainability would be restored and public debt could fall to 80% of GDP in 2026
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Bukele said that he did not "agree on some things" that the study points out, but that he found the IMF reading of the country "interesting" because it highlights the economic recovery and the management done to counteract the covid-19 pandemic.
"They endorse our expansionary economic policies," Bukele wrote in one of several messages posted on his Twitter account on Monday.
Bukele said that the report indicates that industrial production, employment and wages in the third quarter of 2021 reached pre-pandemic levels.In addition, this organization projects economic growth that will be around 10%, an estimate that had already been made by the Central Reserve Bank of El Salvador.
According to the Salvadoran government, finances have improved as a result of the plan to reduce tax evasion.
"The collection is going very well and our public spending has begun to be reduced little by little," said Alejandro Zelaya, Minister of Finance, on November 15 during an interview on the program "Frente a Frente" of Telecorporación Salvadoreña.
Pension system
The IMF report indicates that in addition to fiscal discipline, El Salvador requires "measures that support the sustainability of the pension system, strengthening the relationship between contributions and pensions."
El Salvador's government is studying a package of reforms to the pension system.
President Bukele said on September 15 that in 30 days he would present a pension reform project to the Legislative Assembly, with a pro-government majority, and promised a decent pension for all Salvadorans.
However, after that deadline, he assured that it would take "a few more weeks" to gather new inputs through consultations with different sectors.
The last reforms approved by the Assembly, with 74 out of 84 votes, were in September 2017. At that time the Legislative Assembly created the so-called “Solidarity Guarantee Account” from 5% of the contributions of each worker and employers .
In addition, the collection of commissions was reduced from 2.2% to 1.9% that pension fund managers obtain for managing workers' accounts.
