El Salvador president Nayib Bukele in a tweet thread has confirmed that the country has fully paid its $800 million Eurobond repayment due in January 2023. This is a major achievement for the country, especially after its “Bitcoin (BTC/USD) bet” that attracted a lot of criticism from the likes of the International Monetary Fund (IMF).
The IMF argued that making bitcoin a legal tender exposed the country’s coffers to the price volatility of the cryptocurrency. El Salvador however shut their ears from the rest of the world and instead went ahead to purchase $25 million worth of bitcoin in October and later decided to use its bitcoin gains to build 20 schools. Of course, this was before bitcoin prices turned south.
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El Salvador survives the BTC bear market
After the FTX debacle in November 2022, the price of bitcoin plummeted to about $15K as the global markets also dropped due to the rising inflation and the uncertainty caused by the Russian invasion of Ukraine. BTC dropped by more than 50% from its all-time high as the El Salvador government bonds followed in the plunge.
The bonds dropped to as low as 40% of their original value raising concerns from investors as to whether the country would be able to pay its next debt payment that was due on January 24 2023. Additionally, several credit agencies including Fitch and Moody’s downgraded El Salvador’s rating citing “increased reliance on short-term debt,” primarily citing the $800 million Eurobond repayment that was due in January 2023. The downgrading means the South American country was to pay creditors higher interest rates since it was considered higher risk.
There were also forecast that the country’s debt to GDP would rise to about 86.9% by end of 2022; something which further heightened concerns around the country’s debt sustainability over the medium term.
However, contrary to everyone’s perspective, the country has come out strong after it fully repaid its $800 million debt plus interest on time despite going through a tough year economically speaking.
Bitcoin is currently on a recovery trajectory with investors expecting a breakout above $25K.