Argentina will use 2.3 billion dollars of central bank reserves this year to meet payments to international financing organizations and on its official bilateral debt, according to the Official Gazette.
In exchange, the central bank will receive dollar- denominated, non-transferable 10-year Treasury notes that pay the same interest as the bank receives on international reserves up to a maximum of Libor minus one percentage point, the gazette said.
About 11.3 million of the 2.3 billion are to make up for payments that fell due last year that had been under-estimated, according to the gazette.
President Cristina Fernandez administration, unable to borrow from international markets since the country’s 2001 debt default, has used reserves starting in 2010 to pay international debt. The government plans to use about 8 billion this year from 5.7 billion last year, according to the budget law.
The use of reserves to pay debt, plus capital outflows caused central bank savings to fall to 40.6 billion on March 27, the lowest level since 2007.
In early 2006, Cristina Fernandez’s husband and predecessor Nestor Kirchner used reserves to pay off its 9.5 billion dollars debt to the IMF, a move he said was giving the country “liberty to make national decisions.”
A year ago the Argentine congress approved a review of the Central bank charter which eliminated the cap on reserves for the transfer to the Treasury and also made more flexible the financial aid terms from the issuer to the government.