President Javier Milei’s government has secured the necessary dollar reserves to meet its upcoming debt obligations, boosting bullish trends in the financial markets.
Argentina’s Treasury has taken advantage of last year’s fiscal surplus to purchase approximatelyUS$7 billion, ensuring it can cover its debt repayments through 2025.
This proactive step means the government will not need to tap the capital markets for financing to meet its obligations.
Currently, the government holds US$6.009 billion in the Central Bank of Argentina (BCRA) to cover upcoming capital repayments due in January and July. This is in addition to a nearly US$1 billion transfer made to the Bank of New York Mellon (BNY) in October to cover interest payments on Argentine bonds, including Global and Bonar securities, due this month.
The development has helped reinforce the view in financial markets that the government is unlikely to lift the ‘cepo’ currency controls until after the midterms, as it has already secured funding for its 2025 debt obligations. This is true regardless of whether a new deal is struck with the International Monetary Fund (IMF) or whether the country enters into a repurchase agreement (REPO).
Argentina faces two significant capital repayments this year: US$2.901 billion each in January and July, along with coupon payments totalling around US$1.8 billion in both months.
Despite this, the government's ability to cover these commitments has had a notable impact on the country’s risk profile, with country risk (measured by the sovereign bond spread) plummeting from 1,556 basis points in mid-2024 to the current 637.
In this context, Economy Minister Luis Caputo is working to finalise a new IMF programme by the first quarter of the year, while President Milei has indicated that negotiations will include the disbursement of fresh funds, which could further bolster the Central Bank’s reserves. However, should the government proceed to use part of its Central Bank reserves to cover January’s debt repayments, they are likely to fall by around US$3 billion.
– TIMES/NA/PERFIL
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