- Bukele’s unexpected answer to Moody’s rating agency.
- According to Moody’s, El Salvador’s credit risk may increase if it continues to acquire bitcoin. The country’s credit rating was lowered to “very high risk” by the ratings agency in July.
- El Salvador may have lost $10 million as a result of the recent bitcoin slump, according to Bloomberg.
- After one of the risk rating agencies Moody’s, based in the United States, issued a warning regarding El Salvador’s status in international markets, the Salvadoran president, Nayib Bukele, responded unexpectedly on social media, primarily on Twitter.
As a result of El Salvador’s embrace of Bitcoin (BTC), international risk rating agencies keep a careful eye on the country’s president, Nayib Bukele, and his cryptocurrency operations.
According to rating firm Moody’s, El Salvador’s Bitcoin buying spree, if it persists, might worsen the country’s financial risk. According to Moody’s analyst Jaime Reusche, who talked to Bloomberg, President Nayib Bukele’s administration has had liquidity issues in the past, making Bitcoin trading “quite risky.”
El Salvador holds roughly 1,391 bitcoins, and “if it gets much higher, then that represents an even greater risk to the issuer’s repayment capacity and fiscal profile,” according to Reusche.
The government declared bitcoin legal tender last year, and Blockstream launched the sale of a $1 billion, 10-year bitcoin bond in November.
El Salvador, according to Bloomberg, owns an $800 million bond that will be due in January 2023. Furthermore, in July of last year, Moody’s downgraded the government’s credit rating to CAA1, meaning that the country has a high risk of defaulting on its debts.
The president reacted to news that Moody’s risk rating agency has reduced the country’s rating due to its Bitcoin operations.
The president retweeted an article from the Investing.com portal in which he claimed that Moody’s had “downgraded” El Salvador’s sovereign debt as a result of the country’s adoption of Bitcoin. However, Moody’s has made no such announcements in recent days, aside from a remark about the risks that Bitcoin operations pose to a country whose sovereign outlook was already bleak before adopting the cryptocurrency.
Bukele’s Monday afternoon tweet accompanied the following response: “Breaking (last minute): El Salvador DGAF.”
Since English is the language he chose to respond to the media’s reference to Moody’s rating in July of last year, those four initials have four alternative and highly controversial meanings in English.
This abbreviation could stand for “Don’t Give AF*ck” or “Doesn’t Give AF*ck,” a street slang meaning one couldn’t care less.
Using those acronyms next to the country’s name could be interpreted as implying that El Salvador is unconcerned about finding itself in a delicate situation on the international market, especially at a time when a financial agreement is worth up to $1.3 billion with the International Monetary Fund is urgently needed. The International Monetary Fund (IMF) is one of the most essential and prominent multilateral institutions in the world to provide financial support to countries.
Local experts believe Bukele’s plan to issue bonds in cryptocurrency is a method of signalling to the IMF and other organisations that they are not required for the government to get external financing; but, given the cryptocurrency’s high volatility, the move is fraught with risk.
Bukele’s response to the tweet is similar to how he responds to questions from other prestigious institutions or well-known economists, such as American Steve Hanke, whom he referred to as an“idiot” on January 8 after being questioned about a plan to mine bitcoins using the energy of an inactive volcano, such as Conchagua in La Unión.