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ECONOMY | 23-03-2023 17:08

Argentina confirms plans to force debt swap on state entities

State banks and ANSES social security agency must swap 100% of foreign bond holdings for peso-denominated debt, decree confirms.

Argentina's government is moving ahead with its plans to force public agencies to dump their holdings of dollar-denominated bonds in a bid to shore up its dwindling foreign-exchange reserves.

State banks and the National Social Security Administration (ANSES) must swap 100 percent of their foreign bond holdings under New York law for peso-denominated debt, according to a decree published in the Official Gazette on Thursday. 

The peso bonds maturing in 2036 will pay the higher rate of either a dollar-linked or inflation-linked option.

Investors will also have to sell their holdings of dollar bonds under Argentine law, known locally as Bonars, to the market at the government's request, and must use 70 percent of the proceeds to buy so-called "dual" bonds, according to another decree. The remaining 30 percent of the funds can be used as liquidity.

Argentina announced the measure on Wednesday with the aim of bolstering foreign exchange reserves and easing pressure on the parallel ‘blue dollar’ exchange rate, which recently hit a record low of around 405 pesos to the dollar. According to local brokerage Portfolio Personal Inversiones, the project could boost reserves by US$3.7 billion.

The government is trying to avoid a sharp devaluation of the currency that would fuel inflation that already exceeds 100 percent.

The National Securities Commission (CNV) also removed some restrictions on trading the instruments within its own portfolios, according to a third decree.

The International Monetary Fund said Argentina needs "prudent debt management" to improve its bond and currency markets, and that the measures should not increase vulnerabilities in the future, spokeswoman Julie Kozack told reporters on Thursday.

by Scott Squires & Ignacio Olivera Doll, Bloomberg

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