Analysts are wondering where the dollars for the debt buyback announced by Massa come from

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The government’s intention to buy back $1,000 million in debt left a blanket of doubts in the market. Although traders and analysts agree that the main objective is to ease pressure on the dollar, this is still an unknown factor. Where will the resources come from? to finance the operation in a context of foreign currency shortages.

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Since Wednesday, the Central Bank sold $172 million, of which US$ 91 million deriving from the negative balance of the foreign exchange market and US$ 80 million from the repurchase of global bonds by order of the Treasury. According to official data, the BCRA has allocated 68 million dollars in Global 2030 – the most used security to operate in financial dollars – and the rest in GD29 and GD35.

Hence, the monetary authority reserves sacrificed to intervene indirectly on the bond market, with resources that would come from a Treasury dollar account. The operation will be liquidated only 48 hours after completion, i.e. this Friday, and “for now there was no need to buy dollars”, according to official sources.

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Even so, analysts believe the measure will have an impact sooner or later fewer bookings or higher expenses. “Eventually we will see that he has used part of the reserves, part of the dollar deposits, part of the ANSI, that they budgeted for dollars that would be used to import energy and now they don’t, that strikes me as hardly credible,” he said. Fernando Marull, F&MA Director.

The economy minister announced that the measure was aimed at an “improvement of the debt profile”, while his team acknowledged that it was also seeking contain parallel dollars. TO Martin VauthierAnker economist, “the main objective is to have more room for intervention in the MEP and in the CCL, in a moment of low demand for pesos and pressure on exchange rates”.

“If the goal was to manage liabilities and improve the maturity profile, the central bank has little return, if it set aside $1,000 million to buy bonds with this in mind, it would imply a significant amount of net reserves in a year that the offer of dollars goes down significantly, but that doesn’t have a big impact on 2023 and 2024 debt either,” Vauthier said.

From Economy, they suggested that the debt buyback will be financed with “savings” due to the drop in the price of imported gas (LNG). The government expects to save about $2 billion this year. The public sector closed 2022 with a deficit of around 2.5% of GDP and this year the Economy has promised the IMF to lower it to 1.9% of GDP.

But the consultant 1816 warned that “Massa did not specify where the funding for this operation will come from” and described an unfavorable context, due to the expected $10,000 million cut in the supply of agricultural dollars due to drought and the Treasury’s dependence on indirect financing of the Central through the purchase of peso bonds on the secondary market.

Analysts, on the other hand, estimate that the US$1 billion planned to buy back debt represents up to 16% of net reserves. “The SDRs that the Treasury has are needed to pay the IMF. On the other hand, the BCRA has $6.2 billion of net reserves, but that’s not a large amount.” said Alejandro Giacoia, an economist at Ecoviews.

The Government also has greater urgency to improve the prices of some bonds that expire after the next administration. “Securities entering this deal only expire after 2029, so it’s strange that priority in dollar demand is given to a problem far enough away and not to the imports needed so that production doesn’t stop,” Giacoia said.

For now, no new dollar bond purchases are expected and the market is cautious that the announced amount will materialize. “Considering the low stock of reserves and zero funding available to the Treasury, it is possible that the government’s idea is simply to ‘send the message’ that it will maintain parities, without actually buying $1,000 million,” he estimated. . 1816.

Source: Clarin

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