Peru Aims to Raise Local-Currency Debt to Pay Down Dollar Bonds as Fed Cuts Rates

According to Yahoo News, Peru is looking to increase longer-dated, local-currency debt to pay down dollar bonds as soon as the Federal Reserve begins reducing interest rates, says Finance Minister Alex Contreras. The Andean nation sold 9.2 billion soles ($2.5 billion) in bonds maturing in 2033 at a yield of 7.35% in May, swapping out dollar debt due this decade. Contreras believes the government can already raise debt that is cheaper than that, but expects rates to become even more attractive for borrowers soon. Peru is currently experiencing a recession as high interest rates impact an economy already suffering from social unrest and farming losses related to the El Nino weather pattern. While annual inflation has slowed to 3.64% in November, allowing the central bank to cut rates to 7% from 7.75% earlier this year, slower activity has hurt tax revenue at a time when the government is struggling to meet its fiscal goal. Contreras says Peru will need to implement more spending cuts to achieve a fiscal deficit target of 2.4% of gross domestic product by the end of the year.