Rising debt payments pressure Argentina to solve crisis

Wed Jun 25, 2014 4:59pm EDT
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By Sarah Marsh

BUENOS AIRES (Reuters) - Argentina's debt servicing costs are set to more than double in 2015 as foreign reserves slide to critically low levels, boosting pressure on the nation to resolve its 12-year-old battle with creditors and regain access to international credit markets.

Debt payments in foreign currency will rise to $9.4 billion next year, $6 billion of which is due in October to pay holders of its Boden 2015 debt, according to government data analyzed by Reuters. Argentina has agreed this year to make payments to the Paris Club, the World Bank and Repsol SA that will cost about $1.5 billion in 2015, according to Bank of America estimates. That could bring the total bill to $10.8 billion, compared with about $5 billion this year, including payments on the recent agreements.

Foreign reserves, which fell 30 percent last year and stand at eight-year lows of about $29 billion, are seen falling in the second half of 2014 after Argentina's main farm exports, soy and corn, are harvested and sold in the first half.

"Payments will increase next year and it's going to be tight to pay," said Bank of America economist Marcos Buscaglia in New York, who sees reserves falling to $26.7 billion by the end of 2014.

Official data on total debt payments is open to interpretation, economists say, as it includes a medley of inter-public-sector and international loans that are usually rolled over and therefore would not affect reserves.

Reuters has stripped out most of these loans but not all, such as those held by the pension system for which a clear breakdown of bond holdings in dollars is not readily available.

Latin America's No. 3 economy, which slid into a recession in the first three months of this year, has been burning up its reserves to pay debt and finance imports.

Analysts say there are short-term fixes that Argentina can use to tide over cash flow problems as long as it soon regains access to global credit markets it has been shut out of ever since its default on $100 billion of bonds in 2002..   Continued...

Argentina's Economy Minister Axel Kicillof (C) gives an address "Sovereign Debt Restructuring: The Case of Argentina" next to Sacha Llorenti (L), Chairman of the Group of G77 at United Nations headquarters in New York June 25, 2014. REUTERS/Lucas Jackson