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Argentina Faces Looming Debt Payments and Financial Challenges
The Argentine government is navigating a precarious financial situation as it approaches a challenging summer marked by ample debt payments and limited foreign reserves. Despite recent efforts to bolster its financial position, including acquiring foreign currency and issuing debt in dollars for the first time in eight years, a significant shortfall remains.
Argentina needs to secure more than US$3,000 million to cover upcoming bond maturities after the holidays, with reserves currently near zero. A critical payment of US$4.2 billion is due on January 9th, leaving a US$3.3 billion gap if net reserves aren’t utilized.
Potential solutions being considered include a REPO agreement (with banks reportedly offering up to US$7,000 million) or another offshore bond issuance (similar to the Bonte 2030).These options are expected to be announced in the coming weeks.
While a potential private loan of US$20 billion from a North American Treasury official has been discussed, the Minister of Economy has confirmed receiving offers from international banks ranging between US$6,000 and US$7,000 million. The possibility of activating another tranche of the swap with the United States is also being explored.
any decision will likely result in a reduction in the contry risk, currently above 600 points. Returning to international markets would mean a rate of 10.99%, higher than the Latin American average of 7.14%. The government aims to reduce the country risk to align with regional levels.
The government’s plan includes “buying reserves,” even though President Milei has expressed concerns that this could fuel inflation. However,pressured by the IMF and investors,the Economy Ministry slightly accelerated dollar purchases in November and recently reduced export withholdings,with limited impact on foreign currency supply.
Last week, the government tested the domestic market with a debt placement to 2029 under local law, achieving a rate of 9.26%.This raised US$910 million – 21% of the total January payment. It was the first dollar-denominated issuance since 2018, excluding the Bonte bonds initiated in June (later interrupted due to rising rates).
Despite this issuance, net reserves remain below their level at the end of October, due to Bopreal and IMF payments, highlighting the ongoing challenge of refinancing maturities.
