The debt strategy has started to face a headwind. After a first quarter characterized by strong placements of pesos bonds, the Ministry of Economy raised 30% less funds in May than in March, due to longer maturities and growing financing difficulties, particularly with banks.

According to data from the consulting firm PPI, the debt renewal rate in pesos went from 150% in March to 108% last month. The economy covered the payments due in both cases, but the level of additional funding was reduced. Thus, in March, Martín Guzmán’s team raised extra funds of $ 317 billion, a volume that was $ 75 billion in May.

The minister proposed this year to cover the fiscal deficit with net financing from the private sector (1.8% of GDP), foreign funds (1.7% of GDP) and the monetary issue (1%). So far this year, the Treasury has accumulated an additional $ 647,026 million in the local market (0.9% of GDP). The Treasury financed 60% with debt, when in 2021 it was 30%.

The goal this year is to refinance between 120 and 130% of the commitments, through interest rates above inflation, the reduction of the fiscal red and lower inflation. But the plan began to get complicated in April, a month that marked a before and after in which the Treasury did not even cover all the maturities (90%).

“April was negative and May slightly positive, although in May the level of maturities was also more challengings the refinancing rate is going down and many expire this year, ie they will have to renew it again this year, whenever the deadline is shorter, “said Gabriel Caamaño, economist at Consultora Ledesma.

Nearly 60% of this year’s placements were made with inflation-adjusted bonds (CERs). At the request of the IMF, Economy tried to “de-index” debt in April by offering fixed-rate bonds and longer maturities, but investors distanced themselves amid rising prices, central bank rate hikes. and a higher rate of devaluation.

“In the first quarter there was a transfer of the funding received from the Central Bank to the Treasury, instead of buying Leliq and Pass, banks were attracted to fixed rate and short term instruments, but lately those rates have been equalized and since the Central bank risk is lower, they have turned to BCRA securities, “said Lucio Garay Méndez, of EcoGo.

In the last auction in May, Guzmán went looking for $ 170 billion and got $ 155 billion, an achievement he only managed to break even in the second round this week when he got another $ 20 billion. “Many times you prefer to accept less than what they offer you because they want to charge higher rates,” explained Economy sources.

Despite the setbacks, the Treasury was giving away deadlines of $ 920.020 million in May, the busiest month of the year. The next three months will be less busy with payments of $ 547 billion in June, $ 359 billion in July and $ 319 billion in August.. That’s a total of $ 1.2 billion.

The other part of the financing of the deficit is the monetary issue. In the first five months, the entity led by Miguel Pesce issued 400,000 million dollars. While assistance to the Treasury is within the target limit with the IMF for the second quarter ($ 440,000 million), it now has only $ 40,000 million left to use through June, according to FyMA. Hence, the outcome of the debt auctions will be crucial.

The government has pledged with the IMF to have a fiscal deficit of 2.5% of GDP this year and to finance it with 1% issuance. However, analysts doubt he will be able to pull it off. “The worst comes from the awakening of monetary financing, a month ago it seemed the easiest goal to achieve and now it seems complicated,” said Pedro Siaba Serrate, of PPI.

In addition to higher spending in June on Christmas bonuses and pensions, which require more funding, economists are concerned about political uncertainty and investors’ fears of borrowing after-election-adjusted inflation. In fact, 90% of the penultimate placement in May was extended until May 2023.

Struggles in the coalition to expand spending to contain deterioration in revenue (and votes) along with doubts over the implementation of rate segmentation are also expected to impact the fiscal and monetary target. Therefore, with inflation expectations of between 70 and 80%, the Treasury is likely to continue to use CER debt to attract banks.