El Salvador is Planning to Launch Bitcoin “Volcano Bond”
March 28, 2022The country of El Salvador has been working on increasing the levels of Bitcoin participation in its economy. Last year in September, the country elevated the top coin as a legal tender in the region. However, now the state is planning to introduce the first-ever Bitcoin pegged bonds that have gained some notoriety among the international cryptocurrency community.
Speaking to the journalists on the matter, Finance Minister Salvador Alejandro Zelaya remarked that the right estimated time for the launch of the bond in question falls between 15th and 20th March. He also shared the latest updates on the volcano bond project claiming that the testing phase and the preparations for the tools are near completion.
Future of Volcano Bond
Nathalie Marshik is head of emerging markets sovereign research who recently claimed shared some reservations about the success potential of the bond in question. She claimed that at first, the government planned to introduce the volcano bond as a sovereign bond. However, now the nature of the bond has been changed to a securitized corporate bond.
According to Marshik, the vicissitude might reflect negatively on demand for the bond in the open market. On the other hand, FM Zelaya claimed that the government did not anticipate an unfortunate event like the Ukraine war to take place. Marshik also claimed that the country would not be able to secure any loans from IMF without removing Bitcoin as a legal tender.
IMF and El Salvador
El Salvador government is planning to back $590 million pension reform with the volcano bond. Last year, the Moody ratings demoted the credit score of the country to CAA1. Meanwhile, recent IMF reports projected that the country is facing bigger fiscal deficits, and the debt interest is also consistently increasing.
IMF reports also predicted that the deficit of the country will take up 5.7% of the GDP in 2022. On the other hand, the international loan banker also claimed that public debt will take up 96% of GDP by 2026. Marshik claimed that the country needs at least a 3% adjustment for its GDP to stay within a sustainable level. Meanwhile, the president of Salvador is making big plans to save billions in remittance costs and building a Bitcoin city to attract more revenue from across the globe.
