El Salvador seeks to allay default fears with sovereign bond buyback. The country’s debt has traded at deep discount since it adopted bitcoin as legal tender.

El Salvador said on Tuesday that it planned to buy back $1.6bn of its sovereign bonds in an attempt to allay fears of default in the Central American country that adopted bitcoin as legal tender last year, according to the Financial Times.

President Nayib Bukele announced on Twitter that he was sending two bills to the national assembly “to ensure that we have the available funds to make a transparent, public and voluntary purchase offer to all the holders of Salvadoran sovereign debt bonds”.

He added the bonds would be bought back at market prices and the process would begin in about six weeks. “El Salvador has the liquidity not only to pay all of its commitments when they are due, but also purchase all of its own debt (till 2025) in advance,” Bukele said.

Finance minister Alejandro Zelaya told a press conference that the government would pay for the buyback using special drawing rights from the IMF, along with a $200mn loan from the Central American Bank for Economic Integration.