Amid the rise that bitcoin (BTC) has experienced in recent months, El Salvador's holdings have also risen substantially, currently recording unrealized gains estimated at 58%. According to the statistics of the tracker that keeps track of the purchases made by Nayib Bukele's government, the Central American country's bitcoin treasure is valued at a figure that ranges between 380 and 400 million dollars.
This is an amount that has caught the attention of several analysts, because exceeds the amount of a loan that El Salvador requested four years ago to the International Monetary Fund (IMF), whose repayment must be completed in two years. As reported by the IMF, a request for emergency assistance for El Salvador was approved in April 2020, of approximately USD 389 million. This, within the framework of the implementation of a Rapid Financing Instrument (RFI) to face the coronavirus pandemic. According to the agency, this was the first loan to El Salvador in more than three decades. «Timely disbursement of funds, as well as transparency in their accountability and reporting, must be ensured,» the IMF said. Based on this, a payment agreement was made and by 2023 USD 122 million had been reimbursed. According to the budget items of the Ministry of Finance, payments for this 2024 were established at USD 206.3 million (including interest); and by 2025 USD 115 million will be paid. These are amounts that are already lower than bitcoin holdings who runs the countrywhich has led many to speculate about the possibility of Bukele turning to digital currency to pay this debt.
Despite criticism, Nayib Bukele has insisted on maintaining his strategy with bitcoin. Source: presidency.gob.sv.
El Salvador seeks alternatives to pay debt with the IMF
Regarding El Salvador and bitcoin, the renowned venture capitalist, Tim Draper, has been calling attention to the benefits that the digital currency brings to the nation. In a recent interview he anticipated that El Salvador's strategic investments in BTC could allow it to pay its debts with international institutions such as the IMF, thus achieving financial independence. The possibility of the government resorting to bitcoin as a financing alternative is also brought up considering the difficulties that have arisen for Bukele agrees to reach an agreement with the IMF. One of the organization's requests is precisely that bitcoin cease to be legal tender. A measure that the Salvadoran government not willing to negotiate. In that sense, the financial company Barclays recalled, in a recent report, the outstanding debt with the IMF since 2020. It highlighted that, in the absence of an agreement on a program, El Salvador must repay more than USD 300 million in these two years and has to look for alternatives. Barclays assures that an El Salvador program with the IMF is increasingly uncertain, due to the «contradictory» messages from the Salvadoran government.
Although logic indicates that we must move forward with a program with the IMF, it seems that El Salvador is not doing so. An IMF program will remain a potential lifeline when funding eventually shrinks; For now, El Salvador has a minimum of financing alternatives, which are what it seems to prefer. Barclays Report.
Bitcoin as an income alternative for El Salvador
While the possibilities of an agreement with the IMF seem to be reduced, Bukele stands firm in your bitcoin strategy. Last March, the president reacted to criticism about his investments in the digital currency. He asked for patience as the cryptocurrency fell and raised concerns. Although now, when the price of BTC is on the rise and has marked another all-time high, he is pleased with his initiative. The president affirms that having bitcoin as currency generates income through different means. He cites the program so that foreigners can obtain citizenship in exchange for investing millions in bitcoins. He also makes references to income from mining farms owned by the government, and the use of BTC to pay for various government services. Bukele is sure that the country can earn a lot of money thanks to the currency created by Satoshi Nakamoto. That's why he said that He has no intention of selling it., but will continue holding (saving). A mechanism that will allow for more profits as BTC continues to rise. It is inferred from this that, for now, the treasure in bitcoin It will not be used to cancel the debt of more than USD 200 million during 2024. But having a growing investment in an asset that appreciates in value in the long term looks like an advantage. In any case, for the moment, the millions earned with bitcoin They are just a fraction of the general external debt of almost USD 5,000 million that the nation has with the IMF, according to data from Moody's Analytics.