April 18, 2011 / 3:46 PM / 8 years ago

New Argentine CPI to adjust inflation-linked bonds-report

* Government inflation data widely discredited

* Minister say national CPI to replace current index

* Inflation-linked bonds to be tied to new CPI

BUENOS AIRES, April 18 (Reuters) - Argentina’s new nationwide consumer price index (CPI), developed with help from the International Monetary Fund, will be used to adjust inflation-linked bonds, local media reported on Monday.

The government of President Cristina Fernandez is widely suspected of underreporting consumer price rises via Argentina’s CPI, which measures inflation only in the greater Buenos Aires area.

About a quarter of Argentina’s debt is indexed to inflation. Currently, price data collected in the Buenos Aires Metropolitan area feeds into the so-called CER figure BCRA25 used to calculate payments on inflation-linked bonds.

Issuing low inflation numbers has the effect of reducing payments on the government’s inflation-linked debt. It is not yet clear whether the new CPI index will increase the inflation rate.

“The new (national) index will replace the current one that only takes the (Buenos Aires) Metropolitan area into account,” Economy Minister Amado Boudou said on the sidelines of the IMF and World Bank spring meetings in Washington in comments published by daily El Cronista.

“The index will serve the CER and all of the contracts in the country,” he added.

The government asked the IMF to help develop a new, nationwide consumer price index late last year. Data experts ended a mission last week in Argentina and left recommendations on how to design the new price gauge. [ID:nN11116334]

Argentina’s official inflation data has been widely discredited for being too low since January 2007, when the government appointed a political ally to head the consumer price unit at the INDEC national statistics institute.

INDEC’s technical director said in November that holders of Argentina’s inflation-indexed bonds would not benefit from the new CPI. [ID:nN24262702]

According to a report published by local daily La Nacion on Monday, the new nationwide CPI “will adjust inflation-linked bonds which were the market’s favorite before the index was distorted.”

Annual consumer inflation is estimated privately at around 25 percent, one of the world’s highest rates. The government reported 9.7 percent inflation in the 12 months through March ARECI09

Dollar-denominated inflation linked Boden 2014 bonds ARBODEN14D=RASL fell 1.32 percent in early trading on Monday, pressured by global economic concerns.

Despite asking for help with the new inflation index, the government still refuses to let the Fund carry out annual economic reviews routinely undergone by IMF member nations.[ID:nN06208420]

Argentina has barred the IMF from doing the revision since 2006, arguing that the Fund’s policies helped cause the country’s 2001-2002 economic crisis and massive debt default.

Reporting by Guido Nejamkis; Writing by Luis Andres Henao; Editing by Andrew Hay

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