China offers to buy all of El Salvador's foreign debt as it nears default
However, a spokesperson for the Chinese Foreign Ministry said he was not aware of such a deal
November 8, 2022 8:12pm
Updated: November 21, 2022 3:55pm
China has offered to buy all of El Salvador’s foreign debt, Salvadoran Vice President Felix Ulloa told Bloomberg on Monday.
"China has offered to buy all our debt, but we need to tread carefully," Vice President Felix Ulloa said. "We are not going to sell to the first bidder, we need to see the conditions."
However, a spokesperson for the Chinese Foreign Ministry said he was not aware of such a deal, Bloomberg reported.
The Central American country has been seeking to alleviate pressure in its bond market and avoid defaulting on its foreign debt.
In September, El Salvador’s government announced an offer to buy back parts of sovereign debt bonds maturing in 2023 and 2025.
Ulloa said El Salvador has successfully repurchased some of its bonds and plans to repurchase more in January when $667 million in bonds is due.
El Salvador was the first country to make bitcoin legal tender in September 2021. After investing more than $325 million in bitcoin, the digital currency has lost more than 60% of its value, costing the country over $60 million in losses.
President Nayib Bukele has bitcoin purchases has affected the country’s debt-to-GDP ratio, raising it to almost 87% and generating fears that El Salvador will not be able to pay its upcoming debts.
The International Monetary Fund (IMF), the World Bank, and JP Morgan, along with other financial and economic institutions, have warned that El Salvador is on an unsustainable path.
Rating agencies, such as Fitch and Moody’s, have downgraded El Salvador’s credit score over its bitcoin investments, claiming that Bukele’s bitcoin holdings are adding to the country’s risk portfolio and subjecting the country to extreme volatility.