El Salvador after the Bitcoin Reset: IMF Climbdown, CECOT, and the 2026 Fiscal Outlook

September 2021 Bitcoin adoption and the January 2025 IMF climbdown #

On September 7, 2021 the Bitcoin Legal Tender Law (Decreto 57, Asamblea Legislativa) entered into force, making El Salvador the first sovereign to grant Bitcoin legal tender status alongside the US dollar (the 2001 Ley de Integracion Monetaria dollar regime remained). The law obliged every economic agent to accept Bitcoin when offered, established the Chivo Wallet with a USD 30 onboarding bonus financed from the FIDEBITCOIN trust at BANDESAL, and authorized state Bitcoin acquisition. The IMF, the World Bank, and the three major rating agencies issued warnings on financial integrity and fiscal contingent liabilities. Spreads on the 2052 USD bond traded above 2,400 basis points by mid 2022 as Bitcoin fell from USD 67,000 in November 2021 to under USD 16,000 in November 2022.

On January 29, 2025 the IMF Executive Board approved a 40 month, USD 1.4 billion Extended Fund Facility, with parallel access of roughly USD 2.1 billion from the World Bank and the Inter American Development Bank lifting total external official support to about USD 3.5 billion. The program anchors on a primary fiscal adjustment of 3.5 percent of GDP cumulative through 2027 and on a Bitcoin perimeter that materially narrows the 2021 architecture. The Asamblea Legislativa amended the Bitcoin Law on January 29, 2025 (Decreto 110/2025) so that private sector acceptance is voluntary, taxes are paid only in US dollars, public sector Bitcoin engagement is limited, and the Chivo Wallet is wound down with users migrated to private wallets by mid 2025. The Bitcoin Office (Oficina Nacional del Bitcoin) was retained as a smaller technical unit. Bitcoin remains legal but loses its tender obligation, the distinction the IMF staff report frames as preserving sovereign optionality while removing the contingent liability.

The 6,200 BTC sovereign treasury and the price exposure #

The Salvadoran government Bitcoin treasury, tracked on the Oficina Nacional del Bitcoin public address, stood at 6,209 BTC in April 2026 against 5,748 BTC at end 2024 and 2,381 at end 2022. Accumulation slowed under the EFF perimeter: the one BTC per day program continued through Q4 2024 then tapered, with Bitcoin Office disclosures reporting roughly 461 BTC added across 2025 and Q1 2026 combined, against 1,048 BTC across 2023 and 2024. At USD 96,000 per BTC the position is worth approximately USD 596 million, about 1.4 percent of the 2025 GDP estimate of USD 41.7 billion (BCR Banco Central de Reserva). Average cost basis disclosed by the Bitcoin Office sits near USD 44,500, implying an unrealized gain of roughly USD 320 million against a 2026 Treasury financing gap of USD 1.3 billion.

Mark to market volatility is the operational issue. A 30 percent Bitcoin drawdown, well inside the historical one year distribution, would erase roughly USD 180 million of asset value, equivalent to 0.4 percent of GDP and to 14 percent of the 2026 financing need. The IMF Article IV consultation of February 2025 treats the holdings as off the consolidated nonfinancial public sector balance sheet for fiscal accounting but flags them in the contingent liability footnote and in the Debt Sustainability Analysis sensitivity layer. The Ministerio de Hacienda has confirmed that Bitcoin holdings will not be used to meet program reserve targets and that any disposal would be coordinated with the Fund. Political optics, repeatedly invoked by Bukele on social media, have outrun fiscal weight: at 1.4 percent of GDP the position is more narrative than balance sheet.

Bukele 84 percent reelection and the regime de excepcion #

The February 4, 2024 presidential election returned Nayib Bukele with 84.7 percent of valid votes per the Tribunal Supremo Electoral, against 6.4 percent for Manuel Flores (FMLN) and 5.4 percent for Joel Sanchez (ARENA). Nuevas Ideas took 54 of 60 seats in the Asamblea Legislativa, a supermajority that locked in the 2024 to 2029 reform window. Reelection relied on a 2021 Sala de lo Constitucional ruling, by judges appointed under Decreto 144/2021, that reinterpreted Articles 152 and 154 of the 1983 Constitution to permit consecutive terms, a reading the OAS and the Inter American Commission on Human Rights have publicly contested. The political fact is the 84 percent share, against the 53 percent first round win in 2019, the broadest mandate since the 1992 peace accords.

The regime de excepcion was declared on March 27, 2022 by Decreto Legislativo 333 after a weekend of 87 homicides, and has been extended monthly since. It suspends Articles 7, 12, 13, and 24 of the Constitution, lifting arrest warrant requirements and extending administrative detention to 15 days. By April 2026 the FGR reports more than 84,000 cumulative detentions of MS-13 and Barrio 18 (referenced as 18 St) members or affiliates, of whom roughly 7,800 had been released by court order or by Comision de Conmutacion review by end 2025. Cristosal, the Due Process of Law Foundation, and Human Rights Watch have documented at least 360 deaths in custody since March 2022 and an estimated 8 percent rate of arbitrary detention, a cost borne by detainee families and not captured in the homicide series.

Homicides 105 to 2 per 100,000 and the CECOT mega prison #

The homicide rate fell from 105 per 100,000 in 2015, the peak of the post truce gang war, to 2.4 in 2023 and 1.9 in 2024 per FGR (the Policia Nacional Civil reports the same series with minor classification differences). The 2024 reading places El Salvador below Costa Rica, Panama, and most of the United States. The decomposition matters. The first phase, from 105 in 2015 to roughly 18 in 2021, predates the regime de excepcion and tracks the secret pact between the government and gang leaders documented by El Faro in September 2020 and confirmed by US Treasury OFAC sanctions of December 8, 2021 against officials Carlos Marroquin and Osiris Luna. The second phase, from 18 in 2021 to under 3 in 2023, coincides with mass incarceration under the regime de excepcion. The two channels are causally distinct, and public discussion conflates them.

The Centro de Confinamiento del Terrorismo (CECOT), opened January 31, 2023 in Tecoluca, San Vicente, has a stated design capacity of 40,000 inmates across eight modules, the largest single penal facility in the Western Hemisphere by inmate count. Independent verification is constrained: government figures cluster around 14,500 to 15,500 by end 2024, with subsequent transfers ongoing. Per inmate operating cost disclosures from the Ministerio de Justicia y Seguridad Publica imply roughly USD 7 to 9 per day, well below regional norms, on a perimeter security model that minimizes staffing and rehabilitation. The national prison population is near 2 percent of the adult male population, with a prosecutorial backlog the FGR has acknowledged is straining capacity into 2026 and 2027.

Trump deportation deal and the tourism revenue surge #

On March 15, 2025 the Trump administration concluded an arrangement with the Bukele government under which 238 Venezuelan nationals, identified by US DHS as alleged Tren de Aragua affiliates, were transferred to CECOT under a one year detention agreement priced at approximately USD 6 million, roughly USD 25,000 per detainee or USD 69 per detainee per day. Reuters San Salvador and the Washington Post obtained the diplomatic note. The deal opened a sovereign revenue line with no public sector analogue at this fiscal scale, followed by smaller 2025 transfers totaling several hundred additional non Salvadoran detainees. The legal architecture remains contested in US federal court (JGG v Trump cleared the Fourth Circuit in mid 2025), which makes scaling unpredictable. At full run rate the revenue is small (0.014 percent of GDP) but politically central to the Bukele Trump alignment and to the security narrative supporting tourism.

Tourism revenue reached USD 3.41 billion in 2024 per the BCR balance of payments, against USD 1.74 billion in 2019 and USD 0.65 billion in 2020. Arrivals reached 3.9 million in 2024 against 2.5 million in 2019. Growth is driven by US Salvadoran diaspora visits, the post 2022 security narrative, and Pacific surf and adventure tourism (the Surf City circuit at La Libertad and El Sunzal). MITUR projects USD 4.0 billion in 2026, conditional on the security trajectory. Remittances reached USD 8.48 billion in 2024 per the BCR, 24.0 percent of GDP, a structural feature that pre dates Bukele: Salvadoran household income is tied to US wages, payroll cycles, and enforcement policy. A US deportation tightening that cut remittance flows by 10 percent would subtract roughly 2.4 percent of GDP, an order of magnitude larger than the deportation revenue line and the Bitcoin treasury combined.

2026 fiscal outlook and the Strategos scenario set #

The 2026 fiscal envelope under the EFF targets a primary surplus of 1.8 percent of GDP and an overall deficit of 2.6 percent, against a 2024 primary deficit of 0.4 percent and overall deficit of 3.6 percent. Public debt is projected to peak at 86.4 percent of GDP in 2026 before declining to 78 percent by 2029. Financing rests on three pillars: IMF, World Bank, and IDB disbursement (roughly USD 1.0 billion in 2026 combined), USD 800 million to USD 1.0 billion of market access at yields below 8.0 percent (the 2052 sovereign traded near 9.4 percent in March 2026 against 24 percent in mid 2022, reflecting the program credibility premium), and pension reform proceeds (the 2022 ISP reform redirected contributions to the state, a structural revenue line the 2025 EFF formalized inside the consolidated nonfinancial public sector). Domestic LETES and CETES rollovers cover the residual.

The Strategos scenario discipline distinguishes three cases. The base (55 percent) holds the EFF through 2027, homicides below 4 per 100,000, tourism near USD 4.0 billion, remittances flat to up 5 percent, and the Bitcoin treasury inside the perimeter. Yields compress to 7.5 percent and the 2027 to 2030 amortization wall (USD 800 million in 2027, USD 1.6 billion in 2029) is refinanced. The upside (20 percent) layers a diaspora investment turn, deeper Pacific tourism build out, and a Bitcoin rally lifting the treasury above USD 1 billion. The downside (25 percent) runs through three triggers. A US deportation shock cutting remittances 5 to 10 percent would subtract 1.2 to 2.4 percent of GDP. A sustained legal challenge to the regime de excepcion would force a detention reset and could reopen the homicide series. A 40 percent Bitcoin drawdown would interact with sovereign spreads and depositor sentiment in the dollarized banking system. The model is internally coherent. Social durability rests on the real wage path, the rule of law trajectory after 2026, and the US relationship anchoring deportation revenue and remittances.

Sources #

• El Salvador: Request for an Extended Arrangement Under the Extended Fund Facility, Staff Report, January 29, 2025
• El Salvador 2025 Article IV Consultation, February 2025
• Memoria de Labores y Estadisticas del Sector Externo, Balanza de Pagos 2024
• Marco Fiscal de Mediano Plazo 2025 a 2029 y Proyecto de Presupuesto 2026
• Estadisticas de Homicidios y Detenciones bajo Regimen de Excepcion
• Decreto 110 de 2025, Reformas a la Ley Bitcoin, Asamblea Legislativa
• Reporte de Tenencias de Bitcoin del Estado Salvadoreno
• Resultados Electorales Definitivos, Eleccion Presidencial Febrero 4, 2024
• Estadisticas de Turismo y Llegadas Internacionales 2024
• Trump El Salvador Deportation Deal Coverage and Diplomatic Note, March 2025
• El Salvador Estado de Excepcion, Detenciones, y CECOT, Informes Anuales
• OFAC Designations Marroquin and Luna, Pacto con Pandillas Documentation