By Eliana Raszewski and Hugh Bronstein
BUENOS AIRES (Reuters) – Argentina will negotiate with its sovereign bond holders and the International Monetary Fund to extend the maturity of its debt obligations as a way to secure the country's ability to pay, Prime Minister Hernan Lacunza said Wednesday.
At a news conference following meetings with an IMF team visiting Argentina, Lacunza said the government would "profile" the maturity of debt owed to the IMF under a $ 57 billion standby agreement.
Interest and principal payments on bonds issued under international and local law will not be altered in the re-profiling. The changes in maturity would be aimed at obligations that are institutional rather than individual investors, he said.
"The priority today is to guarantee stability because it is useless to initiate reactive measures if it is not stability. The first is to regain that stability," Lacunza said at the Buenos Aires news conference.
The peso struck a beating during the day, although the central bank strongly intervened in the foreign exchange market for the second day in a row.
Argentine property prices have been reduced since the August 1
"President Macri instructed me to solve the short-term problem to guarantee electoral stability, but also in the medium and long term so as not to leave a problem for the one who follows, be it he or another candidate," he said Lacunza.
He said the measures were taken "so that the president can distribute his policies without limiting imminent, or too high, debt maturities."
Argentina's peso closed 3.1% weaker at $ 58.1 per dollar Wednesday, even then The central bank sold $ 367 million of reserves during another subsequent day of vigorous intervention aimed at controlling the pesos' fall.
Concerns for Argentina's ability to meet its dollar debt obligations have risen since August 11. The peso has lost almost 22% of its value against the US dollar since then. The currency's weakness has fueled the market's concern for Argentina's ability to pay its dollar obligations.
Changes in the maturity of short-term debt, known as Letes and Lecap, will be between three and six months, Lacunza said.
He said that changes in the maturity of bonds issued under Argentine law would require approval from Congress.
"Markets will see this as a standard," said Hernan Esteves, Buenos Aires economist FyEConsult's consultant,
"The problem is that you have a government debt relief proposal, but it will have to be implemented by the next government , "Esteves said. "It makes it very difficult to manage a tidy transition."
"I don't like to use the word standard. I prefer to think of it as recognizing reality," said Roger Horn, CEO and senior emerging market strategist at SMBC Nikko Securities America in New York. "With bonds trading in the 1940s (penny on the dollar), the market was already expecting a worst-case scenario. It is better to deal with it now than six months from now."
The IMF said in a statement that it analyzed the government's new Argentina has taken "important steps" to meet its liquidity needs and safeguard reserves, states the statement by IMF spokesman Gerry Rice.
The central bank issued a statement saying it would continue to implement a "restrictive monetary policy" and continue to intervene in the foreign exchange market to strengthen the peso.
Sliding out of debt maturity was partially aimed at preserving the central bank's dollar reserves, which amounted to $ 57.9 billion as of August 26.
"The decisions taken prioritize its use of international reserves to maintain monetary and financial stability, even if this involves delaying payments to large public debt investors, "said Governor of the Bank Guido Sandleris in
"These decisions should ease the pressure on the foreign exchange market, reduce any demand for foreign currency and guarantee the availability of resources to limit volatility," it states.