LatinNews Daily - 26 July 2022

* International credit ratings agency Moody’s has warned on the impacts of El Salvador’s adoption of the cryptocurrency bitcoin as legal tender. A new report, excerpts of which have been circulated in the local and foreign media, estimates that all in, the government led by President Nayib Bukele has spent about US$375m on the bitcoin rollout, including roughly US$106m from treasury resources to purchase bitcoin. This, the report states, has resulted in about US$57m in unrealised losses — further constraining the sovereign’s liquidity. It also warns that the policy has had a negative impact on the government’s access to financing, serving to place a further strain on relations with the International Monetary Fund (IMF) and leaving it dependent on other multilateral institutions for access to funds. The Bukele government would seem to have abandoned hope of a new financial arrangement with the IMF, which has warned El Salvador about the effects of the volatility of bitcoin on the country’s already fragile public finances and has urged it to remove the cryptocurrency’s status as legal tender.

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