The president of El Salvador, Nayib Bukele, renewed his faith in bitcoin with the purchase of 500 cryptocurrencies, despite warnings from risk rating agencies of the possibility of non-payment of 800 million in 2023 and the stagnation of negotiations with the Fund International Monetary Fund (IMF) to obtain funds.

In addition, according to an economist consulted by Efe, the country would need financing for more than 3,000 million dollars to cover its budget gaps and the payment of debt in the coming years.

Bukele put into practice one of the maxims of bitcoin enthusiasts: buy when the price drops.

"El Salvador just bought the fall!"announced on Twitter, the only official channel in which the movements of the Salvadoran government with bitcoin are known, adding that the 500 coins were bought at an average price of 30,744 dollars.

This purchase occurred at a time of weakness of the most popular cryptoactive and considered a refuge of value.

The economic effects of the Russian invasion of Ukraine, high inflation and the increase in interest rates caused its value to fall by more than 50% on Monday from its historical maximum reached in October.

El Salvador became in September 2021 the first country in the world to give legal tender to bitcoin and this adoption was placed as Bukele’s main economic bet.


With this new purchase, which exceeded 15.3 million dollars, El Salvador’s bitcoin reserves reached 2,301 bitcoins with a purchase value of more than 100 million dollars.

However, this wallet of bitcoins from El Salvador at the price registered on Wednesday morning is close to 71 million dollars.

This purchase occurred after Bukele had displaced the topic of bitcoin for several days on his social networks for that of fighting gangs and while the placement of 1,000 million dollars in bonds backed by this cryptocurrency has been questioned.

In the opinion of the economist Ricardo Castaneda, from the Central American Institute for Fiscal Studies (Icefi), this purchase resembles "a leap of faith".

"It is a bit like sending the message to your community, but more almost like to your sect, that the projects continue as they are, that we are going to go to the bottom and that everything is going to be fine."Castaneda told Efe.

He added that, since these are public funds, each purchase "has a very high opportunity cost"Given the "they represent resources that are not going to be used, for example, to improve schools, that are not going to be used to buy more medicine".

"The costs of this type of decision sooner or later end up being paid by the population"I underline.

The same day that the president announced the purchase of the 500 coins, he presented on social networks a model of what would be the first bitcoin city.

This project, announced in 2021, would be financed with the bitcoin bonds that the Government intends to place through a public company and with a sovereign guarantee, according to the Minister of Finance, Alejandro Zelaya.

The placement was expected to take place last March, but was postponed, according to Bukele, to prioritize a reform of the pension system.


The adoption of bitcoin as currency in El Salvador raised suspicions among credit assessors and creditors due to the possible economic consequences, to which was added the fragile financial situation.

"There is not a single serious entity or serious analyst who does not agree that El Salvador’s risks of defaulting are rising and that the financial situation is additionally complicated."Castaneda maintained.

Evaluated that "If the country’s economic course is not corrected, the situation can be very complex." and that bitcoin purchases, without knowing the technical reasons, send abroad a message of "improvisation" Y "bewilderment".

He added that "one cannot find a technically backed justification" Y "they seem like decisions of obsessed people who do not listen to reasons to be able to change their decisions".

The IMF urged the country "eliminate the quality of legal tender" of bitcoin, while Fitch Ratings downgraded El Salvador’s long-term credit rating for the "uncertainty" to reach an agreement with the IMF after the adoption of the cryptocurrency.

In early May, Moody’s rating agency reduced El Salvador’s long-term foreign currency issuer rating to "Caa3" of a "Caa1" due to the possibility of a default on the debt, which the country must repay in 2023 and 2025, and the lack of a "credible plan".

"What the risk rating agencies are warning is that even if you get the money to pay the January due date (800 million), you would still need more resources to cover the gap for 2022, 2023 and 2024"Castaneda warned.

He added that "the Government could need more than 3,000 million dollars" to cover its financing needs in the coming years.

According to what the Minister of Finance, Alejandro Zelaya, told Efe, in March 2021, the country was negotiating with the IMF an agreement of between 1,300 and 1,400 million, but recently local journalists who have come to this organization to have a "Cordial relationship".

Zelaya has also said that the risk of El Salvador defaulting is "zero" because "we have the capacity to pay".


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