Argentina refinanced peso-denominated debt worth about $50.3 billion in a record bond swap, the Financial Times writes, citing a statement from the country's Ministry of Economy.
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What is known
Papers worth 42.6 trillion pesos, representing 77% of bonds maturing this year, were exchanged for bonds maturing in 2025-2028. These were mainly bonds issued by representatives of the public sector (including the Central Bank and the Social Security Agency), but the private sector also took part in the process.
These actions are aimed at reducing Argentina's budget deficit. They must also end the government's dependence on printing money, the article notes.
The ultimate goal, analysts say, is to curb both the country's sky-high inflation and exchange rate pressures that make it risky to roll back strict foreign exchange controls imposed by previous governments.
Read: Argentina sold bills worth $3.2 billion to pay off debts
Remember
The fixed exchange rate of the national currency (about 830 pesos per $1) causes huge distortions in the Argentine economy and is a barrier to investment. President Javier Miley planned to abandon currency controls in mid-2024.
The debt swap was a big step forward, it “will give the government much more opportunities to solve financial issues,” says Salvador Vitelli, head of research at the consulting firm Romano Group .
This week, the Argentine Central Bank lowered the key interest rate by 20 percentage points – to 80% per annum from 100%. The decision came as a surprise to economists and market participants.
Argentina has been struggling with high inflation for many years. In February, consumer price growth exceeded 276% in annual terms, which is the highest in three decades. Meanwhile, monthly inflation weakened to 13.2% compared to 20.6% in January, which exceeded experts’ expectations.
At the same time, the Central Bank sees signs that inflation will continue to slow down in the coming months, despite the decline rates. Meanwhile, Argentina's economy is in a sad situation: the IMF predicts a contraction of 2.8% in 2024.