- El Salvador’s government has bought 2,301 units of cryptocurrency in total.
- An $800 million bond issued by El Salvador is due in January 2023.
Alejandro Zelaya, El Salvador’s finance minister, downplayed on Monday fears that a steep decline in the value of bitcoin may harm the economic health of the Central American country. In September, El Salvador became the first government to legalize bitcoin alongside the US currency, despite objections from the International Monetary Fund and other credit agencies.
Economical Harm to the Countries’ Financial Condition
El Salvador’s government has bought 2,301 units of cryptocurrency since September of last year, and on Monday, its value plunged to its lowest level since 2020. According to a Deutsche Welle assessment quoted by Zelaya, Bitcoin’s worth in the nation has dropped by $40 million.
Since the country decided to accept Bitcoin as currency, its value has fallen by almost 50%. Investors are fleeing in droves as El Salvador, which had initially planned to debut its much-anticipated “volcano bonds” in March 2022, delays their issuance once again. According to Finance Minister Alejandro Zelaya, the nation decided to delay the planned $1 billion sales to build El Salvador’s “Bitcoin City.”
In many people’s minds, these bonds represent the country of Central America’s final resort to securing its financial future. It seems doubtful that the International Monetary Fund (IMF) would authorize El Salvador’s loan repayments due to concerns about the sustainability of the country’s bitcoin experiment. On top of that, the World Bank turned down the country’s request for assistance when it was originally stated in June 2021 that it intended to embrace bitcoin.
An $800 million bond issued by El Salvador is due in January 2023. The country’s debt rating was lowered to CAA1 by Moody’s in July 2021, indicating that it is in danger of defaulting on its financial obligations.