El Salvador is Buying Back Debt Amid Bitcoin’s Price Drop

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Nayib Bukele, the president of El Salvador, wants to buy the dip once more — but this time, he's targeting the bonds of his own nation rather than the pioneer Crypto asset.

The pro-Bitcoin leader tweeted on Tuesday that he had written two bills to the El Salvadorian congress requesting for permission to borrow money and repurchase government bonds at market prices, which had fallen up to 75% in the previous year.

Debt buyback plan may be move to stabilize economy after Bitcoin bet

As some believe El Salvador is on the verge of default, Bukele's action tries to lower the government's debt levels. Bukele made headlines during the past year by tweeting about his Bitcoin purchases with El Salvador's national resources. El Salvador currently accepts bitcoin as legal cash.

Bukele has acquired a total of 2,381 BTC, and his investment returns have decreased by more than 46% at the time of this report 

In May, Moody's further reduced the nation's debt rating and listed "Bitcoin-related efforts" as the reason. However, the proposed debt buybacks, according to Bukele and his cabinet, are not the product of financial incompetence.

In addition to being able to pay all of its obligations when they are due, the small sized latin country has the cash on hand to buy back all of its own debt (through 2025), according to Bukele. He added in a separate tweet that the debt buybacks would be carried out "understanding the market price will probably move upwards once we start buying all the available bonds."

Following Bukele's tweet, the price of El Salvador's junk-grade notes increased, with bonds maturing in 2023 jumping over 10% and 2025 bonds rising over 40%, according to Bloomberg.

The legislation calls for a $200 million loan from the Central American Bank for Economic Integration and reserve assets from the International Monetary Fund to fund El Salvador's debt buyout (IMF). The IMF has been loud in its objections to El Salvador's obsession with bitcoin, requesting the nation withdraw bitcoin from its status as legal cash in January due to worries that the nation's debt was "unsustainable."

El Salvador has not made clear the precise goal of its buyback, but Trading Economics reports that since 2016, the number of the country's earnings going toward paying interest on debt has increased gradually.

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