He added that El Salvador “isIt faces a difficult debt repayment schedule with bond maturities in 2023 and 2025 in a context of ongoing funding stress and persistently high funding needs.”
The plan of Nayib Bukele, president of the nation, was to adopt bitcoin as legal currency and launch an issue of 1,000 million dollars in the digital currency. After five months from the announcement, there is no news of the placement. The government has delayed plans to sell the bond and Finance Minister Alejandro Zelaya said on Monday that the drop in the price of the cryptocurrency was affecting investor demand.
The Central American government had scheduled the unprecedented launch of a $1 billion bond between March 15 and 20, but the war between Russia and Ukraine and the volatility of the cryptocurrency pushed it to change the date. In addition, it has not presented in Congress a law that guarantees the issue.
Bukele’s embrace of bitcoin was not only the lifeline to avoid the country’s bankruptcy, but also the bet for the future to turn the small Central American country into a world financial center thanks to cryptocurrency. Along with the issuance of 1,000 million, the president announced the construction of Bitcoin City, near the Conchagua volcano, to provide energy for digital currency mining. It will be a tax-free city. The only tax will be VAT at a rate of 10% to finance construction and city services.
The drop in the price of Salvadoran debt has only been surpassed by that of Ukrainian bonds since the outbreak of the war with Russia. Indeed, El Salvador’s benchmark bonds due in 2032 are trading at record lows, at 40% of face value, suggesting investors are bracing for default.
The president of the central bank of El Salvador, however, has assured that there is a “zero risk” that the country will stop paying its creditors.
Source: Ambito
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