What are the government’s financing needs for 2022

Of the total amount of money needed, there are approximately US$ 3,714 million that are planned to be obtained through the placement of international bonds and others issued in the domestic market. The other sources of financing will be credits from international organizations (US$350 million) and the rest corresponds to other assets (about US$71 million).

Indebtedness

The total projected net indebtedness for this year (that is, deducting the redemptions of titles) is projected in approximately US$ 1,850 million, “below the limit set by law for 2022 (of US $ 2,100 million)”, says the report.

At the end of 2021, the Central Government’s gross debt stock was estimated at 59.6% of nominal GDP, decreasing 1.7 percentage points compared to the end of 2020. The estimated net debt decreased 1.2 percentage points, to stand at at an estimated 55.1% of GDP.

Another part of the report says that “Liability management operations in the domestic and international markets have contributed to maintaining a robust maturity profile, thus reducing refinancing risk.”

At the end of 2021, the average maturity of the debt portfolio was 12.9 years. And the proportion of debt in local currency, in the total portfolio, increased to 47.3% (almost 2 percentage points higher at the end of 2020), despite the valuation effects of the exchange rate, it is explained.

On the other hand, the report shows that as of January 2022, the government’s liquid assets were US$ 1,834 million and credit lines with multilateral organizations (Inter-American Development Bank, Andean Development Corporation and Latin American Reserve Fund) added up to US$1,865 million. Taken as a whole, the precautionary liquidity is sufficient to cover all debt service between February 2022 and January 2023.

FEM

The strategy

Regarding the pillars of the debt management strategy for this year, the Debt Unit is ready to “continue deepening” financing in local currency in the domestic market. And “as part of the strategy to increase the proportion of public sector debt denominated in local currency, favorable market conditions will continue to be sought that allow the conversion of loans with multilateral organizations denominated in foreign currency, into local currency (both in nominal pesos as in UI)”, is explained.

It is also planned to carry out swap and/or repurchase operations of instruments issued by the government.in order to continue with the maturity extension policy and minimize the refinancing risk.

Finally as announced last year it is planned to integrate sustainable financing into the debt management strategy through the issuance of green bonds, in order to “capitalize and enhance Uruguay’s strengths in environmental, social and governance (ESG) factors and climate change policies.” See the full report

Last week the Minister of the Environment, Adrián PeñaHe reported that Uruguay is close to issuing a “sustainable bond” of public debt for approximately US$ 1,000 million, what will it have an interest rate according to the fulfillment of environmental goals that the country has for 2025.