Argentina’s Debt Maturity: A $2 Billion Challenge Amid Shrinking Central Bank Reserves

Argentina is facing two major financial issues: the maturity of a large amount of debt and the depletion of its foreign exchange reserves.Debt Maturity: Over $2 billion of local currency debt is set to mature soon.64% of local currency debt is set to mature in less than a year, and 70% of it is indexed to inflation, which is currently running at 88% annually and expected to hit 100% this year.

Argentina deferred $15.4 billion in interest payments due this year in a debt swap operation on June 8.An average of $96 million of debt matures each year in the rated horizon.’

Foreign Exchange Reserves:
Argentina has around $50 billion in foreign exchange reserves.
To cover its external funding need (short-term external debt plus the current account deficit), Argentina would need around $80 billion in reserves, or over 12 percent of pre-devaluation GDP.

The reserves of the Central Bank of Argentina are close to historical lows.

The rising central bank debt poses a risk to the country’s monetary stability, and its ratio to the monetary base is now over 200%, comparable to the one observed in the late 1980s, a period that included a hyperinflationary episode.

Moody’s warns that Argentina’s central bank debt could further stoke inflation and aggravate any exchange rate shock if savers flee from the local peso currency.