Argentina Debt Rises on Peso Borrowing and Interest

For investors, the shift is a double-edged signal. On one hand, a larger share of debt in pesos can reduce immediate exchange-rate pressure and limit the pass-through from currency swings into the sovereign balance sheet. On the other, it pushes more refinancing risk onto the domestic market, where the state must keep rolling over large volumes of indexed and peso paper. The ministry said 49% of debt in normal payment status is now denominated in local currency and 51% in foreign currency, a balance that leaves Argentina still exposed to hard-currency liabilities while increasingly reliant on local issuance.

The jump in local debt also reflects how the government has been managing the liability side of the balance sheet. The ministry cited a strong rise in peso instruments indexed to inflation or the exchange rate, as well as interest capitalization in instruments such as Boncap. In September alone, the central administration made debt payments equivalent to $12.8 billion, with 87% settled in pesos and 13% in foreign currency. Of that total, $12.46 billion went to principal and just $337 million to interest, indicating that refinancing and rollover operations, rather than cash interest outlays, are doing most of the heavy lifting.

The broader fiscal picture is not improving cleanly. Since President Javier Milei took office in November 2023, gross public debt has risen by the equivalent of $61.07 billion, from $425.56 billion to $486.63 billion, even as gross international reserves at the central bank almost doubled from $21.51 billion to $46.09 billion. That reserve build offers some cushion, but it does not erase the fact that debt expansion has continued under a program centered on fiscal adjustment and tighter monetary control.

The composition of the debt stock also shows where the pressure is concentrated. Títulos and Letras del Tesoro account for 77.9% of debt in normal payment status, while obligations to official external creditors make up 20.2%. Debt with multilateral lenders, including the IMF, climbed during the current administration from $73.68 billion to $95.56 billion, with IMF exposure rising from $41.47 billion to $57.07 billion. That leaves Argentina still heavily dependent on official financing and domestic rollovers rather than on broad market access.

For bondholders, the immediate question is not just the size of the debt stock but whether the state can keep extending maturities without reigniting inflation, rate pressure or exchange-rate stress. The move toward peso debt may buy time, but it also means the sovereign is leaning more on the local financial system at a moment when real rates, refinancing costs and rollover concentration remain central risks. The next test will be whether the Treasury can sustain demand for peso instruments without having to pay up materially, and whether debt growth begins to slow as the fiscal program matures.