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El Salvador's Volcano Bond could start this week
The so-called volcanic bonds would be the first Bitcoin-supported bonds that are issued by a country The International Monetary Fund has asked El Salvador to abolish Bitcoin as a legal means of payment, and referred to the volatility and the additional risk for the citizens of the country. “Vulkan bonds” of the country are already on the market on Tuesday. Finance Minister Alejandro Zelaya told a local television station that "between 15 and 20 March 20," and added that the country "almost finished the tools". "But the international context will tell us ...
El Salvador's Volcano Bond could start this week
- The so-called volcanic bonds would be the first Bitcoin-supported bonds that are issued by a country
- The International Monetary Fund has asked El Salvador to abolish Bitcoin as a legal means of payment, and referred to volatility and the additional risk for the citizens of the state
Since El Salvador's immersion in Bitcoin is deepened, the closely observed and controversial "volcanic bonds" of the country could already be launched on Tuesday.
Finance Minister Alejandro Zelaya told a local television station that "between 15 and 20 March 20," and added that the country was "almost finished".
"But the international context will tell us ... I didn't expect the war in Ukraine," said Zelaya supposedly said .
The launch of the Bitcoin bond-according to the energy source of the mining company, the volcano Conchaagua, referred to as a "volcanic bond"-due to the low credit views and the increasing debt of the country, Nathalie Marshik, head of the Schwelllanders bond research at Stifel Financial, said.
There were no details, a regulatory framework or a brochure on the bonds, Marshik emphasized, which would make it difficult to predict the demand for the supply.
"These bonds began as government bonds," said Marshik. "Now it is a securitized corporate bond that [Raises] the question of success."
A loan from the International Monetary Fund (IMF), who asked El Salvador to lift Bitcoin as a legal means of payment, is unlikely.
"The chances of an IMF loan are zero," she said. "[El Salvador Officials] go around and say that a pension reform is due and you will receive a bond of $ 590 million from the pension system."
Bitcoin harbors considerable risks for financial stability and consumer protection, the executive directors of the IMF said in January in a Saying about the financial health of El Salvador.
"[Directors] emphasized that great risks are associated with the use of Bitcoin," the explanation said. "They asked the authorities to restrict the scope of the Bitcoin Act by lifting Bitcoin's status as a legal means of payment."
The IMF expects the budget deficit of El Salvador to reach 5.75 % of gross domestic product (GDP) in 2021 and around 5 % of GDP in 2022. The public debt is also expected to be around 96 % of GDP in 2026.
"The IMF predicts a primary balance for 2022, but says that the debt under current politics is not portable," said Marshik. "El Salvador needs 3 % of the GDP adj to bring the debt to a sustainable level."
Standing budget deficits and high debt service lead to a large and increasing need for financing, according to the IMF report.
el Salvador has an $ 800 million bond that is due in January 2023. In July 2021, the rating agency Moody’s classified the country's debt rating on CAA1, which was exposed to a risk of default.
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The contribution "El Salvador's 'Volcano Bond' could start this week" is not a financial advice.