Probably because it would be just a sticky plaster. You want to hold on that liquidity for survival, particularly in a situation where you can't borrow anymore - so at least you can keep the lights on by paying cash for the essential transactions (petrol, food, etc).

> As a comparision US debt to GDP ratio is 133%

The bigger and wealthier the country is, the more markets are willing to cut them some slack. Japan is at 263%, France 112%, etc etc. It's something of a fraud but that's how it is. Capital markets are often very bigoted, to be charitable.

It’s not just that, if you issue debt in a currency you control you can theoretically never default, you can just keep devaluing your currency to pay off previous debts. El Salvador has two currencies right now and they control neither of them.

It’s about risk. US debt is sustainable because bond holders trust them to effectively manage their economy so that they can pay them back. Are you seriously suggesting that not trusting the Salvadorian government to the same extent is fraudulent, or bigoted? Would you trust them? If so and you’re right, then you should make a killing investing in their bonds given the return rates.

It also depends on who you are in debt to. For example, Japan is mainly indebted to its citizens.

Even better, a majority of Japan's government debt is owed to the Japanese Government. Through the Japan Central Bank.

The remainder is owed to Japanese citizens and corporations. The remainder no doubt held by other central banks.

Meanwhile the prefectures and towns are not allowed to carry net debt. Granted various accounting tricks and lots of weirdness exists. Including a scheme where the federal government skips paying towns their transfer payments and instead tells them to borrow "on the federal government's behalf". This "favour debt" is then not reported as proper debt as the federal government has promised to pay the missing transfer payments, sometime, in the future.

Only the reality is that Japan was essentially the worlds piggy bank for the first half of the last decade

> Through the Japan Central Bank.

Then its meaningless. It should just be subtracted form total debt.

It's a useful budgeting tool. It's not like there is one "government bank account" that every agency and bureaucrat shares.

In the US, agencies can end up with surplus cash (either taxes were higher than needed, or budgets were off, etc). Agencies will buy T bonds with this excess cash to transfer it back to the Treasuries general fund, so it can be reallocated. The T bonds that the agency now holds are far from "meaningless".

From a thousand foot view, the government is one homogenous entity. But that perspective breaks down pretty quickly in the real world. It's pretty easy to find Intragovernmental debt stats and subtract that from the total, if you are so inclined.

Usually, people are concern with the total liability of a government. You can't dismiss intragovernmental debt in this calculation.

I understand that it is an accounting tool. But the function in the economy is totally different.

The case you mention is basically an ability for different departments to earn some interest on unspent budgets and that's fine. Its basically some bureaucracy level budget adjustment mechanism.

However on a state budget and state central bank level the interest paying part of the Bond is not relevant.

And when comparing how large governments debt% is, to have a useful metric for practical purposes those bonds should be removed.

The Central Bank would need to sell that debt on the open market to quell inflation so it is still relevant. If the debt is high enough that it constrains the central banks ability to manage inflation without causing default either high inflation or massive private debt default are inevitable in the long run.

The only “out” is a miraculous increase in future productivity or an increasing percentage of working age adults that increase GDP to make it sustainable. Of course in the long run we are all dead.

Its still useless. If the government is paying the interest to itself it literally does nothing. Its just an accounting.

It’s not a fraud it’s a reaction to the total level of assets the sovereign holds and their ability to get more. Needless to say the countries you mention considerably outpace El Salvador in this department.

People always talk about debts GDP ratio and forget to tell in what currency the debt is.

It's, obviously, not the same, a debt in your own currency that in a currency that you don't control.

A country that is taking debt in a currency that they don't control is, almost always, searching for trouble.

El Salvador doesn't have a currency, they operate in US dollars, a consequence of US's Neocolonial situation on the region, they are de facto a sorts of "economic colony"

As a Salvadoran here. Using the USD is a great advantage. I'd rather be paid in USD than in any other Latin American currency.

Every country is different. But would we, in the particular case of El Salvador, be better if we operated in another currency?

- The USD is the currency of our main trade partner and the currency of the 30% of Salvadorans that live in the US. Our remittances don't incurre in expensive foreign exchange.

- Less Foreign Exchange risk, compared to what Colombians, Chileans, Argentina or Mexicans experience.

- We also have lower interest rates than many bigger Latin American economies.

- Most Latin American currencies have been devalued in the past years. With few exceptions like the Guatemalan Quetzal. I've heard about the Cuban Peso Convertible and the Panama Balboa too but those are pegged to the dollar anyways. Or French Guyana and some Caribbean islands which use the Euro perhaps.

$800M is just the payment due in six months. There’s lots more behind it. Hence, they said medium term, not short.

There are significant differences between the US and El Salvador that raw debt to GDP does not capture.

The US only issues bonds in its own currency, which makes a massive difference.

Foreign-denominated debt is a huge trap for developing countries. Some more conspiratorial folk would say that’s intentional (to take their natural resources by making them indebted, buying their resource exports and then they have to pay much of that revenue back to you as interest).

A quarter of your forex reserves in the short term means a potential issue in the medium term. The US obviously has a lot more ability to pay US dollar denominated debts...