MercoPress. South Atlantic News Agency

Argentina appeals to 5.7bn dollars Central bank reserves to pay sovereign debt

Economy minister Hernan Lorenzino signed the resolution

As was anticipated in the Argentine 2012 Budget the government is appealing to Central Bank reserves to pay sovereign debts. According to a resolution published in the Official Gazette, a Treasury bill equivalent to 5.674 billion dollars will be repaid to the bank in several instalments during ten years.

The resolution is dated April 20 but was only published on Thursday April 26, signed by Economy minister Hernan Lorenzino and contemplates interest rates to be paid every six months and grants funds are to be used to cover this year’s debt deadlines.

The interest rate will be similar to that paid to the Central bank’s international reserves during that same period with a maximum of the Libor annual rate minus one percentage point.

According to local economist Soledad Perez Duhalde the main disbursement is due in August involving 2.2 billion dollars and again at the end of the year bonds linked to Argentina’s GDP growth, a sum estimated in 2 billion dollars.

Contrary to what happened in 2010 and 2011 the use of international reserves will only cover partially this year’s maturities. This is because the free disposable reserves simply are not enough to cover all payments. (Disposable reserves are defined as the difference between international reserves and the monetary base calculated in dollars).

Perez Duhalde argues that another 1 to 1.5 billion dollars will be needed to complete loans due, and the Argentine government’s plan is to cover the difference by floating short term bonds in the local market and among government institutions.

It was also revealed that Enarsa, Argentina’s Energy corporation will receive from the Treasury over 10 billion Argentine pesos for the import of fuels, “which is then sold in the domestic market at subsidized prices”.

The Total Energy Program which receives Bolivian natural gas (at international prices) supplies the fuel to some of Argentina’s thermo-electric generating plants.

This year’s Enarsa budget estimates 10.5 billion pesos (approx 2.3bn dollars) for imports, which in the case of Bolivia will be mostly purchased from Repsol-YPF that has strong interests in the landlocked country.

Argentina’s fuel imports reached 3 billion dollars in 2003 but by 2011 had trebled to 9.4 billion, and this year could soar to 12 billion unless the Argentine government in the months left is capable of considerably increasing the production capacity of seized YPF.