Argentina is balking at selling dollar debt in the local market following a surge in borrowing costs, complicating its efforts to meet billions in debt payments next year.

The government hasn’t issued a Bonar dollar bond at home in two months — its longest pause since launching the program in February — as yields surged over 500 basis points to more than 12%. At the same time, soaring borrowing costs in global markets have dashed any lingering hopes of a first-time bond sale abroad.

That pause could come at a heavy cost. The government had planned to sell almost another $1 billion in the local market this year, followed by an additional $5 billion in 2027. Economy Minister Luis Caputo said Wednesday that the government still expects to sell local bonds next year, but could tap a currency swap with China if it’s unable to do so.

“When authorities had the chance to smooth next year’s financing schedule, they chose not to, arguing that all-in yields were too high,” said Armando Armenta, senior economist at AllianceBernstein. “Now, that decision implies the 2027 election season will be bumpy.”Argentina faces about $25 billion in hard-currency debt payments next year, part of a heavier maturity schedule stretching through 2030. The government had outlined a plan to meet those obligations without relying on global bond markets, instead banking on central bank dollar purchases, privatizations, multilateral financing and local issuance. It is that last pillar of support that is now weakening.

As Argentina’s economic growth stalls, inflation remains stubbornly high and fears of unemployment mount, concern that President Javier Milei will lose next year’s election — bringing his pro-market policies to an abrupt end — is likely to intensify.

Local investors are already drawing a stark distinction between debt that matures before and after the October 2027 vote. The yield gap between local dollar bonds on either side of the election has widened to almost 500 basis points, according to data compiled by Bloomberg.

Caputo tried to allay concerns on Wednesday after meeting investors on the sidelines of the International Monetary Fund and World Bank meetings in Bangkok, highlighting Argentina’s $19 billion swap line with China’s central bank. That includes about $5 billion that can be used to repay debt — roughly matching the amount the government plans to raise through local law dollar bonds next year.

While previous administrations have used some of it to meet debt obligations to multilateral lenders such as the IMF and make payments to bondholders, the swap isn’t a like-for-like replacement for dollar bonds. It provides yuan to Argentina’s central bank rather than dollars directly to the Treasury, and the terms governing its use aren’t fully public.

The tougher financing backdrop is putting renewed focus on opportunities the government passed up earlier this year.

Argentina explored an international bond sale in early 2026, hiring Alejandro Lew as finance secretary to spearhead the plan. Milei ultimately ruled against issuing because of the cost, and Lew resigned.

Another window opened around June after rating upgrades pushed sovereign spreads toward 400 basis points, their lowest in about eight years, and all-in yields below 9%. Caputo again held off, favoring cheaper financing available elsewhere, including the local dollar market.

“It probably would have been a good idea for Argentina to issue internationally back then, and strengthen its reserves,” said Ramiro Blazquez, a Latin America strategist at StoneX. “Now it looks more complicated because I don’t see spreads falling meaningfully before the election.”The government says it has been assembling firepower to defend the peso in the run-up to elections. Milei puts the arsenal at roughly $75 billion, including central bank dollar purchases and $20 billion each in swap lines with the US and China. It’s also banking on additional financing from banks and multilateral lenders.

“We know that next year we have presidential elections,” Milei said this month in Paris. “That’s why we’ve spent this entire year getting ahead of it and preparing a bazooka of dollars.”Argentina also stepped up efforts to raise dollars, recently announcing the privatization of water utility AySA, while the central bank accelerated purchases of greenback this month.

Still, Argentina hasn’t lost its appeal among debt investors, with double-digit bond yields luring buyers who remain convinced by Milei’s economic overhaul.

“It’s still a good story — the selloff for me is more of an entry point to increase relative to developed market bonds,” said Lamine Bougueroua, EM fund manager at Carmignac, one of the largest holders of Argentine debt. “They still need to raise some dollars — but at this point, I think they will be able to do that.”