El Salvador was downgraded for accepting Bitcoin

 El Salvador was downgraded for accepting Bitcoin

Fitch Ratings yesterday downgraded El Salvador's rating to discourage investment, citing risks from last year's legalization of Bitcoin.

President Nayib Bukele's unprecedented policies, from firing the nation's top judges to using public funds to trade Bitcoin on personal phones, are increasing El Salvador's risks to the home country. investment and credit rating agencies.

Fitch also said that "financial risks are increasing as El Salvador becomes increasingly dependent on short-term debt". Soon, they will have to repay the $800 million worth of bonds. The country's credit rating was therefore downgraded from B- to CCC.

El Salvador President Nayib Bukele. Photo: Bloomberg

El Salvador President Nayib Bukele. Photo: Bloomberg

"Institutional weakness and concentration of power in the hands of the president is increasing policy uncertainty. The acceptance of Bitcoin as legal currency creates more uncertainty with the country's possibility of IMF support. financial period 2022 - 2023", Fitch explained in the report.

El Salvador's $800 million bond batch matures in January 2023. Although the yields on these bonds are at a two-year high, Finance Minister Alejandro Zelaya insists their default is "0%". The country's bonds are also among the worst performers in emerging markets in 2021, according to the Bloomberg Emerging Market USD Sovereign Index.

Fitch also forecasts El Salvador's growth this year will slow to 3.5% from 10.5% last year.

Last year, Moody's Investors Service downgraded El Salvador's credit, also because of concerns with the use of Bitcoin.