El Salvador’s Finance Minister Alejandro Zelaya on Monday has refuted concerns that bitcoin’s price tumble would hurt the Central American nation’s fiscal health. Speaking at a press conference, Zelaya said
“When they tell me that the financial risk for El Salvador because of Bitcoin is really high, the only thing I can do is smile. The fiscal risk is extremely minimal.”
After charting history by becoming the first nation to make bitcoin a legal tender, El Salvador has been at the receiving end of credit agencies around the world with Moody’s reducing the country’s debt rating to CAA1 in July 2021, indicating that it is at risk of defaulting on loans.
International Monetary Fund [IMF] too had sent out warnings and urged the Central American nation to reconsider and change its decision.
But that hardly made any impact as, since last September, El Salvador’s government has purchased 2,301 units of the cryptocurrency, which fell on Monday to its lowest value since 2020.
In the past few months, El Salvador’s President Nayib Bukele had made it a routine to announce “buy the dip”, through his official Twitter handle and boast about locking in at lower prices. The country’s bitcoin reserves were around $71.4 million at the time of Bukele’s last Twitter update.
El Salvador’s Reserves Have Depreciated To A Low Of $52 million
Now, with market conditions massively driving down the price of Bitcoin, El Salvador’s reserves have reduced to a low of $52 million. Bitcoin’s value has dropped nearly 50% since it became legal tender in the country.
In addition to that, the country has continued to put on hold the much anticipated $1 billion offerings, which are supposed to fund El Salvador’s “Bitcoin City,” following turbulence in the markets.
The bonds were often touted as one of the nation’s last financial resort. According to a recent estimate from Deutsche Welles, the country’s BTC portfolio had shed some $40 million in value.
When confronted with the findings, Zelaya chose to downplay saying the loss hardly impact its economy. “Forty million dollars does not even represent 0.5% of our national general budget,” he said.