Does a bitcoin rally to $100K repay El Salvador’s IMF loans?

Will a rising bitcoin price cure El Salvador’s indebtedness to the International Monetary Fund (IMF)? Earlier this week, Tim Draper claimed a rally to $100,000 per bitcoin would allow the country to repay its IMF loans “and never have to talk to them again.”

The claim sparked a discussion about how much debt El Salvador owns — and how much bitcoin can contribute to easing its burden.

With some generous math, Draper’s claim that $100,000 bitcoin would allow IMF repayment has superficial merit. Specifically, El Salvador owes 107.7 million SDRs to the IMF worth 1.35049 USD apiece.

In other words, the country owes approximately $80 million to the IMF.

Switching to the asset side of the country’s financials, El Salvador claims to own 5,913.76 BTC, each of which currently trades at $67,973.

So if BTC were to rally $32,026 and hit Draper’s $100,000 threshold, El Salvador would gain $189 million from its holdings, which is a larger number than its $80 million of IMF debt.

Read more: This Bukele lobbyist now works for Tether too

Draper’s claim passes an elementary math check. Yes, the literal profits from El Salvador’s bitcoin holdings if bitcoin were to rally to $100,000 would total more than its IMF debt.

However, Draper makes two massive assumptions that undermine his claim.

Why $100K bitcoin is not a cure-all for El Salvador loans

First, this calculation assumes that the country’s bitcoin are unencumbered — i.e. not already committed to other purposes or collateralizing other loan or contractual obligations.

Second, this calculation disregards non-IMF liabilities, which number in the billions of dollars. Draper simplistically assumes that the country will be able to remit profits from its revalued bitcoin holdings directly to the IMF without first paying off more senior creditors.

A quick fact-check reveals that both assumptions are difficult to reconcile with Draper’s claim that $100,000 bitcoin will somehow solve El Salvador’s indebtedness to the IMF, the world’s preeminent lender with $1 trillion in assets, or empower President Nayib Bukele to “never have to talk to them again.”

On the first point, El Salvador’s bitcoin are not unencumbered. Bukele has committed bitcoin to a variety of obligations, including geothermal plants, a new city, community and infrastructure projects, and even a private investment bank. El Salvador cannot simply give all profits from a price rally directly to the IMF.

On the second point, IMF loans are only a small portion of El Salvador’s sovereign indebtedness. Every year, the country refinances low single-digit billions worth of short-term debt and also owes a double-digit billions of dollars worth of long-term debt.

Comparing these massive figures to its IMF loans of just $80 million reveals the country’s significant indebtedness to non-IMF creditors. Although a price rally would obviously help boost the country’s assets a bit, it would probably take much more than $100K bitcoin to repay the IMF, let alone all of El Salvador’s other lenders.

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