El Salvador’s Bitcoin Surge is Helping the Country to Buy Back More Debt

El Salvador has initiated its third dollar bond buyback this year, bolstered by Bitcoin’s all-time high after the US election results. 

The government has announced plans to repurchase bonds maturing between 2027 and 2034, with over $2.5 billion in outstanding principal.  

El Salvador’s Bitcoin Bet Continues to Fuel its Economy

According to Bloomberg reports, the buyback depends on securing new financing. However, the specific financing terms have yet to be disclosed.  El Salvador’s Bitcoin gains have significantly improved its bond performance. The country’s bond has returned 4.7% since Donald Trump’s victory in the US elections last week. 

Overall, this makes the country’s debt one of the top performers in emerging markets, trailing only Ukraine. A second Trump term is widely perceived as advantageous for President Nayib Bukele. It will potentially increase the likelihood of securing financial backing from the International Monetary Fund (IMF).  

“For years, haters criticized Nayib Bukele’s Bitcoin “gamble” while completely failing to understand his strategy. El Salvador never allocated more to Bitcoin than it could afford to lose. This is no gamble, it’s applied game theory—and the first mover is about to reap his rewards,” influencer Lina Seiche wrote on a recent X (formerly Twitter) post.

Bukele gained global attention in 2021 when El Salvador became the first country to adopt Bitcoin as legal tender. The nation’s Bitcoin holdings are now valued at $515 million after the latest all-time high. 

El Salvador’s Bitcoin portfolio over the years. Source: Nayib Tracker

IMF Continues its Criticism

Despite the positive market response, the IMF continues to urge El Salvador to reduce its reliance on Bitcoin. The IMF has consistently opposed the cryptocurrency’s use as legal tender, citing risks to the nation’s economic stability.  

However, Bukele remains committed to Bitcoin’s integration into the economy. Earlier this year, Turkish company Yilport Holding invested $1.6 billion in El Salvador’s Bitcoin City development project.  

Bukele originally announced the plan for this project back in 2021. Bitcoin City development continues to rely on government-issued Bitcoin bonds for funding. This ambitious project aims to establish a hub for cryptocurrency innovation and investment.  

Amidst these developments, El Salvador repurchased $487 million in bonds in April after raising $1 billion in debt. This included an interest-only security linked to its credit rating or an agreement with the IMF.  The latest buyback effort is being handled by Bank of America, according to the government’s statement.