Argentina to seek $8 billion via new bonds as budget deficit rises by 60%.
Argentina will issue a fresh round of dollar-denominated debt notes worth an estimated $8 billion in the next few days, top officials from the Finance Ministry confirmed yesterday.
The government hopes to bring in $5 billion through the issuance of treasury notes. In addition, a further $3 billion in bonds will later be offered to larger offshore funds willing to invest in the country, while a re-financing process will address the $5 billion due on old bonds maturing this year.
The Macri administration's financial program for FY 2016, announced yesterday by Finance Secretary Luis Caputo and Deputy Minister Pedro Lacoste, estimates that Argentina will need $37 billion in order to finance the current fiscal deficit (projected at $24.2 billion), as well as an additional $12.4 billion in outstanding foreign debt payments.
While Lacoste described this year's budget deficit as “complying with our targets,” the projected 360 billion peso deficit is a 60% increase from the record 225 billion pesos registered in 2015 - one of President Mauricio Macri's central campaign themes last year. The budget deficit in dollar terms would remain virtually unchanged at $24 billion as a result of Macri's devaluation in December; but would rise as a share of GDP from 4.1% in 2015 to 4.8% this year (the highest since 1990).
Financing sources
Argentina retained over $7 billion from the $16.5 billion global bond sale last week, the remainder being used to pay off holdout bondholders. That leaves $30 billion needed to finance the deficit and debt payments due this year, which will come from a variety of sources.
According to officials an additional $3 billion from bond sales, $5 billion in re-financed bond maturities, and another $5 billion from the dollar-denominated LETES Treasury notes auction will plug the remaining gap. The ANSES social security agency and other public agencies will chip in $2.7 billion, while bilateral and multilateral loans are expected to raise a further $3 billion. Borrowing from the IMF, whose debt Argentina canceled in 2006, will be avoided in favor of World Bank loans of up to $2 billion.
The successful international bond sale last week, the largest in third world history, has given the Macri administration hope that future debt roll-overs will pay lower interest rates than the relatively high 7.25% offered in last week's issuance in order to stoke interest.
The Central Bank will continue to serve as the largest source of fiscal financing, however. It will emit 160 billion pesos ($11 billion) for this purpose, or around a third of the remainder. This means that, contrary to Macri's assertion during the 2015 campaign, the Central Bank will continue to “print” money throughout this year - although at a slower pace than the 37% growth in the monetary base registered in 2015. Analysts believe the slower pace will reduce inflation in the second half of the year, though at the cost of triggering a recession and in any case not enough to meet this year’s targets.
Foreign debt, meanwhile, is likely to play an increasing role in Argentina's finances. This is a sharp departure from the Kirchner era, at the end of which only a third of Argentina's $240 billion public debt was to foreign creditors (compared to two thirds in 2003).
At: http://buenosairesherald.com/article/213415/gov%E2%80%99t-to-seek-us$8b-via-new-bonds
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