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El Salvador Introduces Debt Repurchase Bills Amid Default Speculation

El Salvador Introduces Debt Repurchase Bills Amid Default Speculation

Last updated 11th Aug 2022
Disclosure
  • There is speculation that the Central American country will default on its debt
  • The president assured El Salvador’s liquidity sufficed to cover its current debts in a timely manner

On Tuesday, El Salvador President Nayib Bukele sent the local congress two bills to try and secure funds to repurchase sovereign debt bonds maturing next year and in 2025, CoinDesk wrote. His announcements came amid speculation that the Central American country would default on its debt.

Strained relations with conventional finance market

Relations between El Salvador and the traditional credit market remain strained. The International Monetary Fund repeatedly recommended the country stop using Bitcoin as legal tender because of the risks and liabilities associated with it.

El Salvador has lost over 50% on Bitcoin investments

The country has lost around 54% on its investments in the flagship crypto, equivalent to a potential loss of almost $60 million, according to the president's announcements.

El Salvador bought the Bitcoin currently in reserves for $45,000 per BTC on average, having spent a total of $103.9 million on it so far.

Buying operation to begin in six weeks

The government of El Salvador plans to begin the buying operation in six weeks, after completing the corresponding paperwork, according to a tweet by Bukele. He added that the government would pay the bonds at market price at the time of the transactions.

The president assured El Salvador’s liquidity sufficed to cover its current debts in a timely manner and to purchase all of its debt until 2025 in advance. The bonds maturing next year and in 2025 are worth around $800 million each.

Bitcoin bond plans fell through?

Last November, the president announced plans to issue a Bitcoin bond worth $1 billion using Blockstream’s Bitcoin-based service Liquid. Those plans were put off due to unfavorable market conditions.

Daniela Kirova

Daniela Kirova

Daniela is a writer at Bankless Times, covering the latest news on the cryptocurrency market and blockchain industry. She has over 15 years of experience as a writer, having ghostwritten for several online publications in the financial sector.