The bitcoin bet did not prove beneficial for El Salvador and its president, Nayib Bukele, as reported by CNBC. Since September 2021, the country has lost more than half of its investment while bitcoin has lost more than 70% of its value since its peak in November 2021. Worse, the country now has a growing need for cash to be able to face payment of its debt next year, which is expected to exceed $1 billion.
The economic situation in El Salvador is therefore worrying with economic growth at half mast, a high deficit with a debt/GDP ratio which, according to experts, should reach 87% this year. As the country heads towards financial ruin, fears that El Salvador cannot meet its loan obligations remain. The rating agency Fitch Ratings has already lowered the country’s credit score in the face of this uncertainty, which will further complicate its borrowing.
Losses in the millions for El Salvador
If bitcoin is not the culprit of the country’s ruin, the losses caused by its investment have not helped. As Le Figaro points out, El Salvador had invested nearly $105 million in bitcoin. On paper, El Salvador registers a latent loss of approximately 50 million dollars, which represents 0.5% of the national budget. While bitcoin experimentation has earned the country an estimated $374 million, those gains are relatively small in light of the country’s debts and $29 billion economy.
The tech-savvy Salvadoran president had become infatuated with cryptocurrency to raise the economic situation of his country by adopting it as the official currency and by multiplying investments and purchases of bitcoin, despite the low adoption of bitcoin by the Salvadoran people.