巴黎银行-新兴市场-宏观策略-阿根廷：恢复财政偿付能力的艰苦斗争-20190627-14页_607kb

Argentina: Uphill Struggle to Restore Fiscal Solvency

Core Content Summary

This report outlines the fiscal and debt challenges Argentina faces in 2019 and 2020, highlighting the risks to debt sustainability and the government's fiscal performance. It uses data from MECON, BCRA, and other sources to analyze public debt composition, upcoming interest and capital payments, and the impact of macroeconomic factors such as GDP growth and exchange rate fluctuations.

Key Findings

• Debt to GDP Ratio: Argentina's debt to GDP ratio rose by 2.1 percentage points (pp) to 88% since December 2018, according to MECON data. An alternative methodology suggests it increased by 3.6pp to 65.5%.

• Debt Composition:

  • Public Bonds: USD123.2bn
  • Loans: USD60.7bn
  • Central Bank Holdings: USD48.7bn
  • Restructured Bonds: USD43.8bn
  • Treasury Bills: USD34.7bn
  • Total Public Debt: USD311.2bn

• Fiscal Outlook:

  • The government is unlikely to meet its 2019 balanced budget target, and we forecast a primary deficit of 0.8% of GDP.
  • For 2020, a primary surplus of 1% of GDP is needed, which is considered ambitious.
  • The primary deficit in 2019 is expected to be USD3–3.8bn, depending on the assumed exchange rate.

• Fiscal Effort and Debt Sustainability:

  • The primary balance for 2020 is expected to be 0.5% of GDP, rather than the IMF's 1% target.
  • Argentina's debt sustainability is more precarious than IMF estimates, due to its high exposure to hard-currency debt and uncertain fiscal consolidation.
  • A real exchange rate appreciation is key to improving debt sustainability.

• Interest and Capital Payments:

  • In 2019, total interest and capital payments are estimated at USD64.1bn.
  • Intra-public sector payments are USD26.9bn, with USD12.3bn in hard currency.
  • In 2020, total interest and capital payments are expected to be USD48.0bn, with USD20.2bn in intra-public sector payments.

• Short-Term Debt Challenges:

  • In the next 90 days, around USD7bn in hard currency LETES and USD5.3bn in local currency LECAPS will mature.
  • The government has reduced the duration of these notes to improve roll-over rates, with rates of 4–4.5% for notes rolled over before the election and 7–7.5% for those after.

• Leliq Impact:

  • Leliqs (short-term local currency bills) yield 63%, but they are hurting private sector lending as local banks prefer them over lending to the private sector.
  • The quasi-fiscal deficit from Leliqs could reach 3% of GDP by year-end, or 4.5–6% of GDP.

• IMF Funding and Debt Dynamics:

  • The IMF disbursement of USD10.8bn in April 2019 is not included in MECON's data.
  • The government's assumptions for 2020 are too optimistic, including 100% roll-over of short-term debt and IMF funding in 2020.
  • The IMF's baseline scenario lies in the 25th–50th percentile of the debt-to-GDP distribution, indicating a high risk of overshooting.

• Debt Sustainability Analysis:

  • To stabilize public debt, Argentina needs a structural primary surplus of 1.6–3.7% of GDP, depending on the growth and real exchange rate (RER) scenarios.
  • A real exchange rate appreciation is critical for reducing the debt-to-GDP ratio.
  • Excessive real appreciation could cast doubt on external sustainability.

• Fiscal Adjustments:

  • Argentina's fiscal spending is 50% indexed to inflation, which could lead to higher spending if inflation remains high.
  • The new export tax is expected to be temporary, and the backward-looking nature of fiscal spending suggests the need for structural reforms.

• Trade Idea:

  • The current strategy is to buy 1mx6m USDARS forward points to hedge against currency risks.

Conclusion

Argentina faces significant challenges in restoring fiscal solvency due to its high debt-to-GDP ratio, uncertain fiscal performance, and high exposure to hard-currency debt. The presidential elections and IMF funding uncertainty add to the complexity of achieving fiscal targets. A real exchange rate appreciation and fiscal consolidation are essential for long-term debt sustainability. The report emphasizes the need for structural reforms and caution in the currency markets.