BEUNOS AIRES: Argentine President Alberto Fernandez unveiled what he called a “reasonable” new debt repayment deal with the International Monetary Fund on Friday, the day a $700-million repayment was due. The South American country was due this year to pay back $19 billion of its $44-billion debt to the IMF. With a long history of loan defaults, Argentina had insisted it wanted to honor its commitments this time but without sacrificing economic growth. “Compared to previous ones Argentina signed, this deal does not include restrictions that would delay our development,” said Fernandez. Under the previous deal, Argentina would have had to repay $19 billion this year, $20 billion next year and another $4 billion in 2024.
As well as Friday’s sum, another $370 million needed to be paid on Tuesday. IMF managing director Kristalina Georgieva said she was “encouraged by today’s progress… on reaching an understanding on key policies … to tackle current challenges such as inflation and secure more inclusive & sustainable growth for the Argentine people.” The center-left government had repeatedly said the repayment schedule was unsustainable given their lack of reserves, and was pushing to restructure the timetable.
“We had an unpayable debt that left us without present or future, and now we have a reasonable deal that will allow us to grow (the economy) and fulfill our obligations throughout our growth,” said Fernandez. “This understanding plans to sustain the economic recovery that has already begun.” The country remains mired in an economic crisis, though, with inflation at 50 percent and poverty over 40 percent.
Fernandez said the deal crucially would not force Argentina’s government to reduce public spending and would allow it to increase investment in public works. Under the new deal, Argentina has committed to progressively reducing its fiscal deficit from three percent in 2021 to just 0.9 percent in 2024, Economy Minister Martin Guzman said. The gradual reduction-to 2.5 percent in 2022 and 1.9 percent in 2023 — would “not prevent the recovery” of the economy, said Guzman.
It would also allow for public spending to evolve “without an adjustment.” The government has enforced strict exchange controls since coming to power in 2019. The new deal provides for a $5-billion increase in Argentina’s international reserves, which currently stand at about $38 billion. The agreement must still be ratified by Congress, where the governing coalition-despite being the single largest party-is still in the minority. “The negotiations were really difficult,” said Guzman, who has led the government’s efforts. “We worked very hard politically and technically.”
10 years for repayments
Fernandez’s liberal predecessor Mauricio Macri originally agreed a $57-billion loan with the IMF in 2018, but when his successor took office a year later, Fernandez refused to accept the final $13-billion disbursement. After successfully restructuring a $66-billion debt with private international creditors in 2020, Argentina began negotiations with the IMF to delay repayments.
The shadow of 2001 — when Argentina was plunged into social unrest after defaulting on about $100 billion, in what was then the biggest debt default in history-has loomed over the long negotiating process. Guzman said the new agreement would not be ready for a few weeks as the two sides needed work on the “memorandums of understanding.” But he said the repayments would start four years after the agreement is finalized and end six years after that. From the beginning, Argentina’s government insisted that the path to reducing its fiscal deficit was through economic growth rather than reducing public spending.
Macri had introduced deeply unpopular austerity measures to comply with the terms of the IMF bailout, but despite initial signs these were stabilizing the economy, he was unable to halt soaring inflation and poverty. The country experienced three years of recession until registering a 10 percent increase in GDP in 2021, although the economy had shrunk by as much the previous year as it suffered the worst effects of the coronavirus pandemic. — AFP