President of El Salvador Nayib Bukele announced that he will seek re-election after his term ends in 2024, accordEng to Reuters.
El Salvador is among the countries that forbidden presidents from serving consecutive terms, a ban that was overturned by the country’s Supreme Court in September 2021. “Developed countries have re-elections, and thanks to the new configuration of the democratic institution in our country, now El Salvador will too,” President Bukele said in a speech on Thursday.
An ardent champion of BitcoinBukele led El Salvador’s efforts to accept the cryptocurrency as means of payment last year. The move sparked criticism from the likes of The International Monetary Fundprompting El Salvador’s finance minister to declare that “No international organization is going to make us do anything, anything at all.”
Bukele is also behind El Salvador’s Bitcoin shopping party and plans for a volcano-powered Bitcoin city financed by the issue of Bitcoin bonds that has been repeatedly exposed. The crypto bear market has made a dent in the country’s Bitcoin investments; in July 2022, Bukele launched a bid to buy back $1.6 billion in government debt.
At that time, Bukele tweeted“Contrary to what the media has been saying all this time, El Salvador has the liquidity to not only pay all of its obligations when they fall due, but also buy all of its own debt (through 2025) in advance.”
Fitch downgrades El Salvador
Against this backdrop, on Thursday, the credit analysis site for global markets Fitch downgraded El Salvador’s debt rating to CC from CCC. To explain the downgrade, Fitch cited “tight fiscal and external liquidity positions and extremely limited market access amid high fiscal financing needs” in El Salvador.
The Central American country must finance $3.7 billion between September 2022 and January 2023, in addition to pointing to an identified gap of $900 million.
Fitch also estimates a 2022 deficit of $2.4 billion and an overall financing gap of $1 billion when including private bank inflows, special drawing rights and foreign direct investment, putting El Salvador in the “t” position.the probability of payment default.”
El Salvador has a Eurobond debt of 800 million dollars repaid by January, while both Finance Minister Alejandro Zelaya and President Bukele insist the country has “zero risk” of default.
El Salvador’s proposed Bitcoin bonds were expected to raise around $1 billion, according to Financial Times. The President tweeted launched a tender offer for its government bonds earlier this week, but at the time of going to press, has yet to provide an update on the infamous Bitcoin bonds.
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