The country has yet to receive a single cent of the $1bn it's seeking, deepening concern among creditors it will fail to pay back an $800m bond at the start of 2023
For five months now, El Salvador President Nayib Bukele has been trying to hawk a bitcoin-backed bond to international investors. This, he’s insisted, is a better option than turning to multilateral lenders in Washington for more conventional financing.
Since abandoning talks with the IMF and adopting bitcoin as official tender last year, investors have soured on El Salvador’s bonds, concerned not only with the ability to keep current on its debt but also the willingness to keep paying under the eccentric 40-year-old Bukele who has flashed authoritarian tendencies. And now, as the January debt maturity approaches, the 78-cent price on the notes shows many bondholders are losing conviction.
For five months now, El Salvador President Nayib Bukele has been trying to hawk a Bitcoin-backed bond to international investors.Neither the presidency’s office nor the finance ministry replied to requests for comment on the drop in bond prices. In recent comments, the finance minister and central bank president have said there’s “zero risk” of the country defaulting.
It was part of a bigger plan to attract crypto enthusiasts and digital nomads to live in a community to be dubbed Bitcoin City that would be powered by geothermal plants installed at a nearby volcano. The extra yield investors demand to hold the nation’s notes over US Treasuries blew out to 22 percentage points this month, well above the 10 percentage-point threshold for debt to be considered distressed. Its 2050 bond now trades at 37 cents from 96 cents one year ago. There are about $3.3bn in reserves at the central bank.
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