MercoPress. South Atlantic News Agency

Argentine Treasury appeals to government banks to pay debts

Finance Secretary Hernan Lorenzino: “this is not new debt”

Argentina's Treasury will borrow 8.40 billion pesos (2.02 billion US dollars) from state-run Banco Nacion this year to refinance some of its debt with the bank, a top official told state news agency Telam on Wednesday.

Finance Secretary Hernan Lorenzino said the loan would be used to roll over prior debt, emphasizing “this is not new debt” Telam reported.

President Cristina Fernandez's administration has relied on loans from within the public sector, rather than take a chance on a new global bond issue that could be blocked by creditors suing over the country's massive 2002 default.

Lorenzino added that the Treasury would be reducing its overall debt with Banco Nacion this year, rather than accumulating greater loans.

A government resolution published in the official gazette said the 2 billion USD loan would be disbursed each month over the course of this year, starting in February, and would be repaid in 24 monthly quotas beginning in January 2012.

The loan's disbursement will be timed to match the expiry of the government's existing loans with Banco Nacion, Lorenzino told Telam.

The interest on the loan is the Badlar rate -- which is the rate paid by state banks on large fixed-term deposits -- plus 100 basis points. The Badlar BCRA18 is currently at around 10.5%.

Confirming Argentina’s difficulties in having access to voluntary money markets President Cristina Fernández announced that the Inter-American Development Bank (IDB), the Andean Development Corporation (ADC) and the World Bank, will loan Argentina 3.5 billion US dollars destined to public works.

Mrs. Kirchner stated that ”since 2003, Argentina began cancelling its debt, so now financial organizations are loaning us money again. Nobody loans money to those who don’t pay back their debts.”