BUENOS AIRES (Dow Jones)–Argentina’s government plans to borrow 227.9 billion pesos ($54.4 billion) to meet its financing needs in 2012, according to the budget bill sent to Congress.
That includes the issuance of ARS102.2 billion in long-term securities as well as ARS15.1 billion in funds from international organizations and loans for ARS9.8 billion from the country’s largest bank, state-run Banco de la Nacion.
President Cristina Kirchner has preferred to use the central bank’s international reserves and the retirement savings managed by the pension agency instead of more-expensive funding sources like a global bond sale on international credit markets.
The budget earmarks ARS14.3 billion to buy back government bonds whose repurchase clauses were triggered by the country’s blistering economic growth.
Official data show that Argentina’s economy is on track to grow more than 8% this year, after expanding 9.2% in 2010.
But most private-sector economists say official growth data are overstated due to the government’s consistent underreporting of inflation. Even so, few deny the economy is booming thanks to government spending, good prices for the country’s exports and a consumer-spending spree fueled by double-digit wage increases.
The budget proposes spending ARS13.9 billion to pay maturing public debt, including Boden, Bonar and Bocon bonds. To pay private-sector bondholders next year, the government plans to borrow as much as $5.67 billion in international reserves from the Central Bank of Argentina.
According to the budget, the federal government faces interest payments of ARS44.8 billion in 2012, including ARS15.3 billion in gross domestic product warrants whose payouts are tied to economic growth.
The government also has to make principal payments of ARS176.4 billion on its debt, a considerable portion of which is owed to the central bank as well as other public-sector agencies and firms.
Kirchner is seeking authorization from Congress to spend ARS547.1 billion next year, up 18.9% from estimated spending in 2011. Total government revenues are expected to increase 22.8% on the year to ARS551.3 billion in 2012.
However, the Kirchner administration has a habit of building its budgets using extremely conservative forecasts, which usually result in windfall tax revenue when economic growth handily exceeds that outlined in the budget.
Kirchner had to rollover the 2010 budget after opposition parties refused to support her 2011 budget bill last year.
Members of the opposition and ruling coalition have hinted in recent days that they expect Congress to approve the budget, partly because Kirchner recently won about 50% of the vote in Argentina’s first open primary last month, giving her a great deal of fresh political capital.
Kirchner’s stunning victory over a fragmented opposition positions her to handily win a second term in October, with a strong chance that her Frente Para La Victoria coalition will retake control of the Lower House and Senate.
-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740;
ken.parks@dowjones.com
Source: online.wsj.com