Argentina’s debt has reached a critical point-the collapse is coming soon
2022.11.16 13:25
Argentina’s debt has reached a critical point-the collapse is coming soon
Budrigannews.com – An increase in Argentina’s central bank debt poses a risk to the country’s financial stability, ratings agency Moody’s said on Tuesday.
In that scenario, Moody’s warned, the authorities could even freeze peso deposits, an extreme measure that would restore the memory of the notorious “playpen” restrictions during the 2001 crisis aimed at preventing banks from functioning.
“With the amount of pesos that central banks and governments have, we can conclude that we have no choice but to restrict access,” Moody’s analyst Gabriel Torres said in a webinar.
“Argentina has not been in such a situation for some time, but in the past it has,” he added.
The Moody’s report said the central bank’s interest-bearing debt had increased significantly relative to GDP over the past two years, but its ratio to the monetary base was now more than 200 percent.
“The relationship with the monetary base is comparable to what was observed in the late 1980s, including episodes of hyperinflation,” he added.
The company said there were refinancing risks associated with local currency debt, of which 64% matures in less than a year, 70% is indexed to inflation, and now trades at 88% per annum and is expected to reach 100% this year.
“Inflation is on the order of 100%, so a sudden currency shock may allow the authorities to consider freezing bank deposits and savings accounts denominated in pesos to limit further pressure on the exchange rate,” the report said.
“Argentine banks have recently increased their exposure to government and central bank debt (mainly in local currencies), which poses systemic risks for the financial sector,” he said.
