Ahead of the upcoming 2024 elections, El Salvador’s pro Bitcoin President Nayib Bukele has stated that he wants to run for a second term. Meanwhile, Fitch Ratings downgrades the country again.
As a reminder, Nayib Bukele, the president of El Salvador has given legal tender to Bitcoin (BTC) in September 2021. Since then, the country has been multiplying initiatives in this area with purchases of BTC, the establishment of a mining activity or the construction of a city named Bitcoin City.
Bitcoin as legal tender status poses “significant risks”?
Until last year, El Salvador prohibited incumbent presidents from running for a second term as president. But in September 2021, the Central American country’s Supreme Court amended the constitution to make that possible.
And El Salvador could continue in that direction for several more years. Indeed, its head of state, Nayib Bukele, said on September 15 that he would run in the next elections in 2024, Reuters reports. Bukele said:
Developed countries allow re-election and, thanks to the new configuration of the democratic institution of our country, El Salvador will also do so. I announce to the Salvadoran people that I have decided to run for president of the republic.
The U.S. Embassy as well as various foreign powers expressed concern about the decision at the time, calling it “unconstitutional.” According to the IMF, Bitcoin’s legal tender status poses “significant risks” to El Salvador, including its financial stability.
In addition, El Salvador’s Bitcoin policy also displeases Fitch. The rating agency already downgraded the small Central American country earlier this year to “CCC”, it now gives a new rating of “CC”.
El Salvador’s tight fiscal and external liquidity positions and extremely limited market access amid high fiscal financing needs and a large external bond maturity of $800 million in January 2023 make some sort of default likely,” Fitch said Thursday.