The Economy Ministry has announced that it will not ask the Central Bank for temporary advances of cash in November and December and would target local capital markets for financing instead, as it moves to calm Argentina’s currency crisis and shore up Central Bank reserves.
The portfolio, headed by Economy Minister Martín Guzmán, also said it will seek to roll over all capital and interest maturities due before the start of next year.
"The aim is to renew all the principal and interest maturities and obtain net market financing of up to 10 percent with respect to the total maturities" until the end of the year, the Treasury said in a press release.
According to the one-page statement, any financing obtained would be used “to continue reducing the level of assistance” the Central Bank provides to the Treasury. Argentina has printed money in order to cope with public finance problems associated with the coronavirus pandemic, with the Alberto Fernández administration offering welfare and support packages to citizens and employers.
Throughout the year, Argentina’s finances “have been affected by the severe impacts of the pandemic manifested in the contraction of public revenues and in urgent and unavoidable spending needs," explained the Economy Ministry.
"The gradual and tenuous recovery of economic activity" offers a better perspective for the end of the year, it added.
The announcement comes with the country currently in talks with the International Monetary Fund (IMF) over a new financing programme to replace the standby agreement signed by former president Mauricio Macri’s government in 2018. The deal was worth US$57 billion, though Argentina has only received US$44 billion after President Fernández refused to take delivery of the remaining tranches upon taking office in December 2019.
An IMF mission team is due to make its second trip to Buenos Aires in a couple of weeks, with negotiations expecting to ramp up then.
"Faced with the impossibility of accessing financing through capital markets, a larger fiscal deficit has meant an increase in requirements for financial assistance from the Central Bank," said the Economy Ministry.
Argentina successfully restructured foreign debt totalling more than US$65 billion earlier this year, as well as US$41.7 billion of local debt. Without access to international capital markets, the government is seeking to create a debt market in pesos.
The Economy Ministry defended the government’s social support measures, saying it meant the continuation of protections for “sectors of society that remain in a state of vulnerability,” and allows progress … [in the] normalisation of public sector financing."
The portfolio said it hopes to achieve "a considerable reduction in the financing and credit needs of the Central Bank to the government."
Up until September 30, Argentina’s primary deficit amounted to 4.8 percent of the Gross Domestic Product (GDP), rising to 6.4 percent when interest on debt is added.
The government’s 2021 Budget bill foresees a primary fiscal deficit of 4.5 percent of GDP, with economic growth of 5.5 percent and an annual inflation rate of 29 percent.