Public debt reached US$ 403.809 billion after adding US$ 4.977 billion in June, according to the Monthly Debt Bulletin from the Ministry of Finance. Despite the alarming figure, various experts suggest it remains manageable and rule out a short-term default.
According to the official report, 72% of the liabilities correspond to public bonds (in pesos and other currencies), 19% is debt with official external creditors (multilateral organisations and bilateral loans such as those signed with members of the Paris Club), 4% are Treasury Bills and another 4% corresponds to Central Bank Temporary Advances.
36% of the debt in normal payment status is payable in local currency, while the remaining 64% is payable in foreign currency. This shows a change in composition since June of last year when it was 32% and 68%, respectively.
Meanwhile, the debt-to-GDP ratio remained stable at around 85% during the first quarter, below the peak of 89.8% in 2019 and over 100% during the first year of Alberto Fernández's administration.
The opinion of the experts
Aldo Abraham, director of the Fundación Libertad y Progreso, said: "In the refinancing that the Treasury is doing, what is happening is that those who believe that the country's course could be maintained after the change of government are exiting debt in pesos and shifting to debt in dollars to reduce risk.”
"There is also an increasing participation in purchases by the public sector. Looking ahead, it is becoming clear that in the next administration, a large portion of the debt that will need to be renewed will be concentrated in public entities, such as the Central Bank or Anses, which tend to refinance," he added.
"On the other hand, there is a part that will be in the hands of the private sector, and what matters is credibility. If someone is refinancing debt after the next government takes office, they are betting on a change of course. If that happens and the next president has credibility, there is no risk of it ending badly or with a debt restructuring because public entities will refinance and the private sector that has made this bet on a new government will renew the debt and even buy more from the Treasury," concluded Abraham.
Economist Pablo Tigani of Fundación Esperanza said: "The debt is sustainable. Of course, it becomes increasingly challenging, but never as laborious as during the last months of the previous government where a significant part of peso-denominated debt was defaulted. This time, they are renewing both the Treasury and Leliqs debt."
"If one converts peso-denominated debt into dollars at the current CCL or MEP exchange rate and takes the dollar at the time the previous government left, the debt left by the government of Mauricio Macri was much higher than what Alberto Fernández has now," he affirmed.
In this regard, the economist pointed out that when Macri left, the public and Central Bank debt was approximately US$ 420 billion, having assumed with a debt of US$ 245 billion.
Furthermore, he specified that the GDP in dollars was US$ 560 billion in 2015, and by 2019, it had decreased to US$ 360 billion. For this reason, the debt-to-GDP ratio increased.
"For now, the rollover of debt is happening without any difficulty. In the run-up to the elections, if Juntos por el Cambio wins, Patricia Bullrich said that we would have to live with the savings of Argentines. I'm not sure if she was referring to an potential corralito or if she is talking about a Bonex plan," Tigani added.
"On the other hand, if a candidate of the ruling party wins the elections, he or she will probably lower the interest rate in order to gradually reduce the debt in dollars until a debt-to-GDP ratio is achieved that is fully consistent with the growth rate and some modification of the exchange rate," he concluded.
Economist Jorge Colina said: "The government will not necessarily default on a debt in pesos because it can pay it by issuing. But that issuance will generate more inflation. That's why peso-denominated debt is sustainable with inflation".
"What is not sustainable is the debt with society of having an economy that has more and more inflation," he added.