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They confirm that the central government debt reached 88.5% of GDP in the first quarter



The study stated that "for a decade, Argentina has had a growing financial deficit that was mainly funded by monetary affairs and debt with other public authorities under the Kirchner government."

"Cambio replaces these sources of funding with debt with private creditors, mostly in foreign currency," he said.

He explained that this way, The composition of the public debt changed, which meant that the debt in question (net obligations for commitments in the public sector) was raised from 43 per cent of the portfolio at the end of 2015 to 65 per cent of the total during the first quarter of 2019.

This increased confidence in renewals in the capital market. At the same time, the share of government debt in dollars went from 69% of the total to 78%.

Due to these changes, despite the fact that the debt loss rose only 3.5% in dollars in 2018, the jump of more than 100% of the nominal exchange rate represented a 40% debt to GDP, affecting 95% in the third quarter.

Then, the real estimate (through the transfer of the dollar's rise to domestic prices along with a quieter exchange rate) decreased this quota by nearly 10 points in the final quarter of 2018, according to the unit.

He warned that if the IMF's first quarter payment (which was received in the first days of April and that was why it was released from the official accounts), the total debt would have reached 91.4%.

The report analyzed whether it would be sufficient to check the exchange rate to solve the debt problem. In that regard, he reminds that "the impossibility of obtaining foreign currency led us to resort to a last resort loan in order not to violate the maturity of the public debt, mostly denominated in foreign currency."

He recalled that the "largest loan in the IMF's history (for $ 57 billion to be paid in 3 years, solved the risk of an imminent default of government bonds."

However, he warned that "it did not solve the structural problem: since there is still doubt about the debt repayment capacity, the perception of debt is still high". For that reason, the problem just went ahead, the Ecolatina warned.

He argued that "until access to external financing is recovered, to pay the state's debt requires two conditions: that the public sector generates tax savings in pesos and that the country as a whole reaches an external surplus in dollars".

Without the first, there will be no resources to make the payments. Without the latter, the public purchases of foreign currency will compete with importers and savers, which increases the exchange rate pressure.

An estimated real exchange rate would help the Treasury generate a lower short-term financial deficit (due to increased activity and a lower interest rate burden).

On the contrary, a new depreciation round would aggravate its ability to buy foreign currency (due to the deepening crisis that would mean and because more pesos would be needed to acquire the same amount of dollars).

In addition, increasing the exchange rate would hamper the burden of debt service (capital and interest) on GDP, to drive investors away, the report reported.

But he warned that "looking at external savings, the opposite is observed: an estimated exchange rate would be cheaper and encourage imports, reducing the net result of real currencies."

In the meantime, a higher dollar would provide incentives to expand exports, enabling an improvement in external performance.

"Short-term efforts (estimate to reduce the financial deficit, reduce debt ratio and win choices) are in contrast to long-term needs (do not intervene to save foreign currency, meaning the exchange rate is depreciated to create a larger external dollar surplus)", he said.

For Ecolatina "this restriction can be removed if our country returned to access external funding, which with a land risk over 850 points seems very remote."

He also warned that "the IMF had already resorted to and it was not enough to restore investor confidence".

"Without maneuvering on the side of the primary result or the financial side, one should seek out the policy that allows the real economy to recover and grow," Ecolatina said.


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