Friday, December 9

Debt in pesos: Economy aims to close the year with rollover close to 120%

In recent months, Economics had indicated that the objective was to close the year with accumulated net financing of over $ 600,000 million and a rollover of annual maturities in pesos of between 115% and 120%. Thus, after a beginning of the semester marked by the elections and the growth of the weight of the issue in the funding of the treasury, the intention was to get as close as possible to the budgeted guideline of covering 60% of the fiscal deficit of 2021 with direct assistance from the Central Bank and 40% with new debt.

The final result will be seen in the last placement of the year and also in accordance with the requests for temporary advances that the Treasury makes to the BCRA in the remainder of the month. According to Ámbito, the financial programming of the Economy for December was, in a prudent scenario, to renew 110% of the maturities of the month and end the year around 118% of accumulated rollover. Although, with what was achieved in the first tender, the number could be located somewhat higher. If in the last tender it manages to renew more than 90% of the pending payments (that is, if it places more than $ 255,798 million), the annual rollover will approach 120%.

If materialized, this would be equivalent to ending 2021 with a net debt in pesos of close to $ 650,000 million, double what was achieved last year. Even so, it will be difficult to meet the original goal of reaping the aforementioned 60-40% financing mix. It is that in the first days of December there was already a transfer from the Central to the Treasury of $ 120,000 million, which raised the annual monetary assistance to $ 1.56 trillion or $ 1.13 trillion if the prepayment of advances made from the income of the Indec special drawing rights.

IMF and 2022

With everything, the economic team is already working with its sights on the monetary and financial program for 2022. This is one of the key points of discussion with the IMF in the preparation of the multi-year plan. The Government aims to advance in a gradual ordering of public accounts, which ensures that it will be done without adjustment, and the Fund calls for an accelerated closure of the monetary financing of the deficit, in accordance with its usual recipe book against inflation. The statement of the agency’s staff after the visit of the delegation of Economy and the BCRA to Washington stated that to attack the rise in prices requires “a reduction in the monetary financing of the fiscal deficit, an adequate monetary policy with real interest rates positive and a coordination of prices and wages ”.

The exhibition of Guzmán in Congress on the Budget left some signs in this regard. For the first time, It explicitly included monetary factors among the causes that determined inflation above its expectations this year. He also announced an anchor for monetary expansion in 2022 and said that the base will remain stable relative to GDP, with the aim of anchoring expectations about nominality together with a price agreement to replace the current freeze. At the same time, the economic team analyzes an eventual change in the BCRA’s reference rate, which remained at 38% nominal and 45.4% annual effective throughout the year, to adapt it to the rate of depreciation that will follow next year (closer to to inflation).

Regarding the financial program, it is proposed to reduce monetary assistance to the Treasury from more than 3% of GDP this year to 1.8% in 2022. For this, net funds from multilateral organizations or bilateral entities are considered for 1.1% of the PBI. The rest of the financial needs (4.9% of GDP) would be covered with debt in pesos for 2% of GDP or $ 1.2 trillion. It will be a challenging target as next year’s local currency maturities exceed $ 3.7 trillion.