Argentina reaches debt deal with IMF

ISTANBUL

Argentina has reached an agreement with the International Monetary Fund to refinance more than $40 billion in debt, President Alberto Fernandez has said.

“We had an unpayable debt that left us without a present or a future, and now we have a reasonable agreement that will allow us to grow and comply,” Fernandez said on national television on Jan. 28.

Since 2020, Argentina has been in an arduous negotiation with the IMF to refinance the debt contracted in 2018 during the government of conservative Mauricio Macri in the midst of a currency crisis.

Argentina had spent three years trying to renegotiate repayment terms with the IMF and considered a deal vital to stabilizing an economy whose lengthy crisis has been hit as well by the pandemic.

The South American country was due to repay $19 billion this year, $20 billion next year and another $4 billion in 2024.

The IMF said it would continue to work with Argentina’s officials “in the coming weeks towards reaching a Staff-Level Agreement. As is always the case, final agreement on a program arrangement would be subject to approval of the IMF’s Executive Board.”

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.

The country remains mired in an economic crisis, with inflation at 50 percent and poverty over 40 percent.

Under the new deal, Argentina has committed to progressively reducing its fiscal deficit from 3 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.

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.

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.