Argentina's foreign currency reserves will likely finish the year just
above $30 billion after the federal government pays about $900 million
in debt this week, a top government official said Monday.
So far this year, Argentina has lost about $12.5 billion in
reserves that it uses to pay creditors and buy imported goods ranging
from the luxury cars to badly needed natural gas. Some analysts and
investors fret the country might struggle to make large debt payments in
2015 unless it reverses that trend.
"The level of reserves is expected [to end the year] at
about $30.3 billion," Jorge Capitanich, President Cristina Kirchner's
cabinet chief, said in a televised address.
On Monday, Argentina will pay foreign currency denominated
bonds for $527 million, $300 million to the Bolivian government for
natural gas, and $74 million to multilateral lenders, Mr. Capitanich
said.
After touching a seven-year low of $30.4 billion in early
December, the Kirchner administration managed to lift reserves to $30.8
billion as of last Friday thanks to dollar inflows from soybean exports
and foreign investment in the oil and gas sector.
However, the underlying factors behind the decline in
reserves-debt payments, fuel imports, and inflation-aren't going away
anytime soon.
The energy deficit, the difference between Argentina's
energy exports and imports, more than doubled on the year to $5.9
billion between January and November. Argentina is investing heavily to
develop its massive shale oil and gas resources, but those investments
aren't expected to pay off until the end of the decade.
Rising inflation that most private sector estimates put
north of 25% a year has spurred some Argentines to protect their savings
by dumping pesos and buying dollars.
The Kirchner administration has managed to prevent a run on
the central bank's reserves by severely restricting the dollars that
people and businesses can legally purchase. That in turn has given rise
to a black market where the dollar costs 10 pesos, versus 6.50 pesos on
the regulated currency market.
Economists blame high government spending financed by
printing money as the root cause of the highest rate of inflation in the
Americas after Venezuela.
"The only lasting solution is one that involves tightening
fiscal and monetary policy in order to reduce inflation and instill
confidence in the overall policy mix. Otherwise these are just patches
here and there to contain drain on reserves," says Goldman Sachs
economist Alberto Ramos.
In recent months, the Kirchner administration has focused
on luring fresh money into the country through incentives, including a
generous tax amnesty for those who repatriate undeclared money held
offshore, and by prodding agriculture exporters to part with their
soybeans. A joint venture between state-run oil company YPF SA and
Chevron Corp. also brought in about $940 million to this month.
Mr. Capitanich hinted that the government might extend the
six-month old tax amnesty program when it expires at the end of the
year.
Foreign currency shortages that have forced the government
to restrict imports didn't prevent the economy from roaring back to life
this year after expanding a meager 1.9% in 2012.
The economy likely grew 5.4% during 2013, Mr. Capitanich said.
If official GDP data confirms that number, Mrs. Kirchner's
government will be on the hook next year for billions of dollars in
payments on securities that pay investors when economic growth exceeds
3.2%.
By reporting inflation of just 10.5%, the government makes
growth in Latin America's No.3 economy look far better than it really
is. Earlier this year, the International Monetary Fund reprimanded
Argentina for the poor quality of its GDP and inflation data.