Former El Salvador central bank chief: Bitcoin legalization ‘killed’ ties with the IMF

El Salvador has failed to find common ground with the International Monetary Fund (IMF), and negotiations with it are ‘virtually dead’. This view was voiced by the former head of the country’s central bank, Carlos Acevedo, reports ElSalvador.com.

The matter concerns an agreement with the IMF for financial assistance. In the former central bank chief’s view, the cryptocurrency initiative has cost the country dearly, ‘killing’ its relationship with the Fund.

Bitcoin bonds worth $1 billion, Acevedo called another difficult issue. Initially they planned to issue by 15-20 March 2022, with an option for a further $500 million issuance.

Half of the proceeds from selling the bitcoin bonds were to fund the development of mining infrastructure using geothermal energy. The other 50% — for purchasing digital gold for the state trust.

On March 24 it became known that authorities delayed the issue, awaiting more favourable conditions in the global financial markets. However Acevedo linked the delay to ‘a lack of investor interest’.

‘First they spoke in January, then in March, then said that the Digital Assets Law isn’t ready, then — that pensions are a priority, now the security issue. I believe the government has realised that there is not enough interest in the markets to purchase this issue,’ the economist noted.

He added that the fall in the price of the first cryptocurrency also does not help the idea of the bonds.

‘Over the last six months, Bitcoin has fallen by about 35%, and that does not help create a conducive climate for placement,’ Acevedo noted.

The law legalising the first cryptocurrency in El Salvador took effect on 7 September 2021. The IMF repeatedly criticised the government’s decision, and in January recommended stripping Bitcoin of its status as legal tender.

Earlier Moody’s понизило El Salvador’s long-term foreign-currency rating to Caa1 with a negative outlook. In early 2022, the firm’s analysts noted that purchases by the government exert further pressure on the country’s creditworthiness.

In late January, the IMF’s director of the Monetary and Capital Markets Department, Tobias Adrian, said that cryptocurrency volatility destabilises capital flows in developing markets.

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