In El Salvador, the fall of Bitcoin (BTC) has translated into losses for the Government of Nayib Bukele. which must face a maturity of the dollar debt in January.
Despite this, President Nayib Bukele bought 500 more Bitcoin this week. A very expensive bet for El Salvador and that has not given, so far, the results that were expected.
Immediately, Peter Schiff, president of Euro Pacific Capital, responded: “When are you going to stop throwing away taxpayers’ money? The falls don’t stop, so if you don’t stop buying, the Savior doesn’t stop losing».
Bitcoin crash generates losses in El Salvador
However, since the fall in global markets caused by the uncertainty of the war in Ukraine, inflation and the increase in interest rates by the Federal Reserve in the United States, the Bitcoin price has plummeted. With it, El Salvador’s government bonds have also plummeted, which are trading at 40% of their original value.
As a consequence, the International Monetary Fund (IMF), which could provide support financing for the Nayib Bukele government to meet its next external debt payment in January, urged the country to eliminate Bitcoin as a legal currency. Since it exposes public finances to the ups and downs of the digital asset in the global market.
As a curious fact, Alejandro Zelaya, the Minister of Finance, recognized days ago that the fall in the price of Bitcoin affects investor demand.
Accumulated losses
According to Bloomberg, the rout that has sent Bitcoin tumbling 40% since the end of March has deepened President Nayib Bukele’s cumulative losses on government holdings to about $40 million. That’s a little more than the country’s next bond payment on its foreign debt, with $38.25 million maturing on June 15 in notes maturing in 2035.
To recall, the government of Nayib Bukele has spent about $105 million on the purchase of Bitcoin. Since becoming the first government in the world to make it legal tender on Sept.
In this regard, Carlos Acevedo, the former head of the Central Bank of El Salvador said: “It is risky because it is an extremely volatile asset. And it is an investment that is entirely at the discretion of the president. You buy it on your phone when you want to take advantage of the drop, but you don’t do it right because when you buy there is always a bigger drop».
In addition to this, Carlos Acevedo indicated that he believes that the government will be able to make the due payment with a combination of loans and cash reserves. And a possible pension reform or taking advantage of their special drawing rights with the IMF.
I end with this quote from Nayib Bukele: “The government will take the risk of these transactions».
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