Government presents 2019 - 20 financial programme
In 2019 the government will have to close a financing gap of US$47.6bn. This reflects US$600m in delayed natural gas subsidies, interest payments of US$14.2bn, principal repayments of US$13.7bn (to both private creditors and multilateral organisations) and payments of US$19.1bn on Letras del Tesoro de la Nación (Letes, short - term public debt securities). The government is in a good position to meet these funding needs. It has started 2019 with an initial cash balance of US$10.9bn owing to higher than expected rollover rates of short-term debt in 2018. The government will also draw another US$22.5bn from its IMF stand-by arrangement, borrow US$4.6bn from other multilateral institutions and take on repo loans of US$1.7bn from private banks. It expects that it will be able to rollover US$8.8bn (46%) of the US$19.1bn worth of Letes falling due in 2019.
In 2020, when the government anticipates a primary surplus of US$5.2bn, it will have a smaller financing requirement of US$25.9bn. The government plans to meet its needs th
at year owing to an initial cash balance of US$0.9bn, IMF disbursements of US$5.9bn, domestic bond issues of US$15.2bn, repo loans of US$0.9bn and the rollover of US$9.4bn in Letes.
Although the government's plan hinges on its ability to rollover a significant amount of its short-term debt, the outlook is generally positive on this front. In its first tender of Letes in 2019, onJanuary 8th, the government exceeded expectations by rolling over 100% of the US$950m in Treasury bills that had fallen due. The
Letes — all dollar – denominated — have a 217 - day maturity period and offer a 4.75% rate of return.
The successful placement of Letes has improved expectations of compliance with the government's financial programme. This is also reflected in a reduction of Argentina's five - year US -
dollar credit default swap rate — an indicator of sovereign risk — which fell to 687 basis points on January 10th, down from a recent high of 808 basis points on December 27th 2018.
Impact on the forecast
The government's plan provides a reasonable path to meeting its financing needs in 2019- 20, in line with our forecasts. Although we expect the government to retain good access to debt markets, risks to this forecast are substantial amid economic and political uncertainty