Argentina pays international debts with Central bank ‘free and available’ reserves

Friday, March 4th 2011 - 22:29 UTC

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Central bank president Mercedes Marco del Pont

Argentina's federal government on Friday said it will pay 2.17 billion US dollars owed to international financial organizations this year with central bank reserves and funds held in the treasury.

In a resolution published in the Official Bulletin, President Cristina Fernandez de Kirchner ordered the Economy Ministry to borrow 2.12 billion USD of “free and available” reserves and use 52.9 USD million held in the Treasury.

The ministry will issue the central bank what is essentially a 10-year, non-transferable IOU in exchange for the reserves. The government will pay an interest rate on the borrowed money equivalent to the same rate the Central Bank of Argentina earns on its reserves, but not exceeding the one-year London Interbank Offered Rate, currently below 1%, less one percentage point.

In January, the government borrowed 7.5 billion USD from the central bank under the same mechanism to meet debt payments to private creditors during 2011.

Last year, Cristina Fernandez used 6.6 billion USD of reserves in a move that was bitterly resisted by then-central bank president Martin Perez Redrado and opposition lawmakers.

Mrs Kirchner managed to fend off lawsuits by the opposition, which claimed that Congress had control over the reserves, while Perez Redrado was replaced with pro-government former congresswoman Mercedes Marco del Pont.

The central bank's reserves stood at 52.39 billion USD on Thursday. Under its 2011 monetary program, the Central Bank of Argentina plans to buy 12.5 billion of dollars to build its reserves.