MercoPress. South Atlantic News Agency

Argentina could be short of funds to repay debt by next December

In December the country must repay 3.3 billion USD in capital and interest

Argentina has admitted it does have sufficient funds to cancel all its debts for the rest of the year and this could be linked to the country’s rapprochement with the International Monetary Fund.

According to the Buenos Aires press the Kirchner couple administration needs 5 billion US dollars from now to December but only have 60% of that figure. The situation is not desperate but means further manipulation financial instruments.

“We have 60% of those funds, but the rest is missing”, admitted government sources to Clarín.

Why the lack of funds? Because revenue did not grow at the same pace as government outlays which means that the surplus was considerably less with not enough funds to face the coming payments.

Additional spending for the mid term elections plus a slowing down of activity as a consequence of the global crisis has had an impact in the country.

Argentina which has been cut off from international money markets since the 2002 default and later 2005 debt restructuring which was not accepted by all bond holders, depends on the double surplus: budget primary surplus and trade surplus. If any of the two is insufficient the whole scheme falls down.

According to Financial consultants Econviews from economist Miguel Kiguel, the Argentine government must make repayments of 5.05 billion US dollars to December, which includes capital and interest.

Between September and November monthly outlays are in the range of a tolerable 520 to 630 million US dollars, but in December payments balloon to 3.3 billion US dollars. They correspond to bonds linked to Argentine GDP growth an additional attractive included by then Economy minister Roberto Lavagna to lure investors into the rescheduling program.

The 3.3 billion are made up of 814 million in capital and 2.511 billion in interest.

But since the government has until December, “that maybe why they are playing it cool”, said the official sources. A possibility is for the Argentine government to appeal to the 2.5 billion SDR recently remitted by the IMF as part of the plan to boost global liquidity. The advantage of SDR is that they are automatically exchangeable for hard currencies.

Another option is for the government to appeal to the abundant Central Bank international reserves or float bonds to be purchased by the old-pension fund scheme, recently taken over by the government.

“The Central Bank has sufficient funds to cope with a billion US dollars; the Banco (Development) Nacion can contribute with 1.7 billion US dollars plus other refinancing resources” said Andrea Borda, economist from Broda Consultants who estimate the Argentine government, might need more funds to finance other commitments and provincial governments, most of them in the red.