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Nayib Bukele, the president of El Salvador, sent two bills on Tuesday to the local congress in an effort to secure funds needed to buy back all sovereign debt bonds maturing in 2023 and 2025.
Bukele’s announcements are intended to counter speculation about a potential default by El Salvador, amid strained relations between the Central American country and the traditional credit market, including the International Monetary Fund, which repeatedly recommended El Salvador discontinue the use of bitcoin (BTC) as legal tender due to the financial risks and liabilities created.
El Salvador is down roughly 54% on its investments in bitcoin, representing a potential loss of $55.8 million, according to CoinDesk data based on Bukele's announcements. So far, the country has spent $103.9 million in bitcoin, at an average price of $45,171 per coin.
El Salvador’s government plans to start the purchasing operation in six weeks, after the corresponding paperwork is finished, Bukele said on Twitter, adding that the government will pay the market price for each bond at the time of the transactions.
According to Bukele, El Salvador has enough liquidity to pay its current commitments in a timely manner and to buy all its debt until 2025 in advance.
Hoy enviamos 2 proyectos de ley a la @AsambleaSV para asegurar los fondos para hacer una oferta de compra transparente, pública y voluntaria a todos los tenedores de bonos de deuda soberana salvadoreña desde 2023 hasta 2025, al precio de mercado al momento de cada transacción.
— Nayib Bukele (@nayibbukele) July 26, 2022
The bonds maturing in 2023 total $800 million, and those maturing in 2025 represent a similar amount.
In November, Bukele announced plans to issue a $1 billion “bitcoin bond” that will use Liquid, a bitcoin-based service created by Blockstream. However, that initiative was postponed due to unfavorable market conditions, El Salvador’s finance minister said recently.
El Salvador’s congress is controlled by Bukele's party, Nuevas Ideas, which holds 64 out of 84 votes.