El Salvador’s president Nayib Bukele announced his offer to buy back some debt to holders of bonds maturing between 2023 and 2025. The country’s total public debt amounted to approximately $24 billion in March.
On Monday, he tweeted, “Today we send 2 bills to the @AsambleaSV to secure the funds to make a transparent, public and voluntary purchase offer to all holders of Salvadoran sovereign debt bonds from 2023 to 2025, at the market price at the time of each transaction”.
He also added that the buying back will happen at the market price which is expected to go up once El Salvador starts buying all the available bonds. The repurchase is expected to begin in 6 weeks.
Following these announcements, the finance minister revealed that the operation would be partially funded by reserves allocated in 2021 by the International Monetary Fund and a loan from a Central American multilateral lender.
On Tuesday, the country’s unicameral Congress approved two bills, one of which was requesting to use $360 million in funds from special drawing rights alloted by the IMF to repurchase the bonds.
Another bill that was approved was the one requesting a $200 million loan from the Central American Bank for Economic Integration.
It is worth remembering that Nayib Bukele is under pressure to show healthy public finances as El Salvador’s options have slowed down ahead of an $800 million bond maturity in January.
As per a Citi Research report, the buyback operation would likely cost around $1.7 billion, and this figure is expected to increase based on early market reaction.