It is a little more than the payment of the next coupon of its external debt, of $38.25 million due June 15 in notes due 2035.
Bukele has set the national administration to spend around $105 million to buy Bitcoins since becoming the first country in the world to convert the token into legal tender in September. and dSince then, the cryptocurrency fell 45%. In this way, the value of the country’s 2,301 bitcoins was reduced to about $66 million.
Purchase of 500 bitcoins
Despite the losses, El Salvador announced this Thursday the purchase of 500 Bitcoins for $15.3 million, taking advantage of the fall in the price of the cryptocurrency that is legal tender in the country. The news was communicated by President Bukele.
El Salvador “just bought” at a time of a fall in its value “500 coins at an average price of 30,744 dollars,” the president said on his Twitter account.
This is not the first time that the government has announced the purchase of this cryptocurrency when its price is falling. Already last January he bought 410 bitcoins when each one was around 36,456 dollars. With the latest acquisition, El Salvador has 2,301 bitcoins.
Moody’s cut debt note
Days ago, Moody’s cut the note on the debt in El Salvador and raised the risk of default for the return of US$800 million next month. Specifically, the rating agency changed the rating to Caa3 from Caa1, given “the greater probability of a credit event: restructuring, change in difficulties or default.”
“Moody’s decision to downgrade El Salvador’s ratings reflects an increased probability of a credit event – restructuring, debt swap or default – with relatively high severity,” it said in a statement.
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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