Argentina’s government this Thursday managed to offload 7.4 trillion pesos (about $29.4 billion at the official exchange rate) from immediate Treasury obligations and gain maneuverability in the months leading up to October’s presidential election. The government-debt swap bid launched by the executive branch received an approval rating of 78%, the economy ministry said in a statement. The new titles expire between 2024 and 2025 and are already under the mandate of Alberto Fernández’s successor.
“Today saw the largest sovereign debt swap in Argentina’s history in terms of domestic market maturities,” Economy Minister Sergio Massa said on social media. Massa highlighted the support of the public sector and banks, where adoption is 90%.
Today saw the largest sovereign debt swap in Argentina’s history in terms of domestic market maturities. pic.twitter.com/Tg19MvDc8K
— Sergio Massa (@SergioMassa) June 8, 2023
The new bonds offered by the government were double bonds (which protect the investor from inflation and the depreciation of the peso) with maturities between August and January 2024 and boncer bonds, which only cover the price increase.
This is the second similar operation so far this year in the local market, following the 4.3 trillion pesos (about $2,000 million at the then official exchange rate) debt swap in March, which also included payment to bondholders by March 23 March delayed second half of 2024.
The government has cut maturities by 64% to 4.2 trillion pesos for the remainder of 2023, offering a slightly clearer outlook despite high inflation — 108.8% year-on-year — and the severe macroeconomic imbalances Argentina is currently experiencing promised for the coming months.
The International Monetary Fund, with which Massa’s team is currently negotiating a new review of the debt restructuring agreement, approved the swap. “The IMF welcomes the efforts of the Argentine authorities to reduce refinancing risks related to domestic debt,” IMF spokeswoman Julie Kozack said at a news conference in Washington.
Argentina’s state balance sheet, a country with a chronic foreign exchange deficit, has deteriorated this year because of a historic drought that has cost the countryside, the country’s main agricultural export engine, losses of up to $20,000 million.
With the central bank’s international reserves at a minimum, the Fernández administration has also asked China for help to keep the ship afloat in the final phase of the tenure. Beijing responded with a lifeline last week, expanding currency exchanges between the two countries.
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