El Salvador tries to dispel the fear of payment with the buyback of government bonds

el Salvador said on Tuesday that it is planning to use its government bonds worth 1.6 billion

President Nayib Bukele said on Twitter that he sent the National Assembly two draft laws, "to ensure that we have the available funds in order to provide all owners of Salvadorian government bonds a transparent, public and voluntary purchase offer".

he added that the bonds would be bought back at market prices and the process would begin in about six weeks.

"El Salvador has the liquidity in order not only to pay all of his obligations in the event of due date, but also to buy all of his own debts (until 2025) in advance," said Bukele.

Finance Minister Alejandro Zelaya said at a press conference that the district would pay for the buyback with special educational rights of the IMF, together with a 200 million dollar loan from the Central American Bank for Economic Integration (BCIE).

"We ensure the availability of funds in order to offer our bonds an early purchase option for the debt titles, which will be public and will respect the market regulations," said Zelaya. "This is a sign of the liquidity of our finances."

The bonds of El Salvador have been traded with high discounts since then, since investors reacted skeptically to the introduction of Bitcoin as a legal means of payment in addition to the US dollar. The government of Bukele proposed to sell a Bitcoin bond, but the idea has stalled when the courses of cryptocurrencies collapsed.

"It is the best option that the government had on the menu to honor the course of these bonds. The success of this initiative will depend on how the market reacts," said Carlos Acevedo, former governor of the central bank of El Salvador.

The country's government bonds rose in the newspaper, with loans in 2023 rising by almost 10 cents compared to the dollar and the owner changed at 86 cents. The debts due to 2025 rose to the highest level since April and rose by almost 14 cents to $ 49.6 per dollar. The bang still left the 2025 grades deep in a distributed territory, which underlines the high risk that investors considered the debt.

"The government is based on the courses of the bonds, but the courses will certainly increase with the announced measures," said Ricardo Castañeda, Senior Economist and coordinator for El Salvador at Icefi, a think tank. "In reality, you will pay the total amount at the end, but maybe in advance."

Moody’s classified El Salvador's debt rating in May in May and later estimated the country's not realized Bitcoin losses to $ 57 million. The price of Bitcoin has fallen together with other important cryptocurrencies since the beginning of the year because a crisis records the digital assets sector.

"Initiatives in connection with Bitcoin, including its introduction as a legal means of payment, made an already tense relationship with the international monetary fund. The government prompted the government to rely on regional multilateral institutions," said Moody’s.

Executive directors of the IMF, of which the country had requested a loan of USD 1 billion, have also expressed concerns about the introduction of Bitcoin by El Salvador in the past.