Argentina, IMF ink $44bn debt deal after year-long talks

Published January 29, 2022
Economy Minister Martin Guzman (R) delivering a press conference on an agreement reached with the International Monetary Fund (IMF) next to Argentinian Chief of Cabinet Juan Luis Manzur, in Buenos Aires on Friday. — AFP
Economy Minister Martin Guzman (R) delivering a press conference on an agreement reached with the International Monetary Fund (IMF) next to Argentinian Chief of Cabinet Juan Luis Manzur, in Buenos Aires on Friday. — AFP

BUENOS AIRES: Argentina has struck a deal for a $44.5 billion standby agreement with the International Monetary Fund (IMF), the government said on Friday, a major breakthrough in tense and lengthy talks to restructure loans the country cannot repay.

The South American country has been locked in talks for over a year with the IMF over a new programme to revamp debt outstanding from a failed $57bn loan deal from 2018, the fund’s largest ever. It faced a $700 million payment due on Friday.

“With this agreement, we can order the present and build a future,” President Alberto Fernandez said in an address to the nation from his residence in the capital Buenos Aires, adding the agreement would not limit Argentina’s economic plans or spending.

“We had an unpayable debt, which left us without a present and a future. Now we have a reasonable agreement that will allow us to grow and meet our obligations through our growth.”

The IMF did not immediately comment on the agreement.

Under the agreement the country will target reducing fiscal deficit to 0.9pc and gradually end central bank financing

Recent uncertainty over a deal has hammered Argentina’s sovereign bonds, while anti-IMF rhetoric has risen in the country, with some protesters on Thursday calling for the government to suspend repayments.

The country’s stock index, bonds and the black market peso all jumped on Friday morning after the news.

Argentina’s Economy Minister Martin Guzman said in a news conference that under the deal the country would target reducing its fiscal deficit to 0.9 per cent by 2024 and gradually end central bank financing to the Treasury.

“We hope to reach our deficit objectives with real spending that does not stop the economic recovery and to be able to gradually strengthen tax collection,” Guzman said.

He ruled out an abrupt exchange rate devaluation, said the country would seek to have positive real interest rates and bring down rampant inflation currently running at above 50pc on an annual basis, which hurts savings and salaries.

Argentina and the IMF had been at loggerheads in talks over how quickly Argentina should reduce its fiscal deficit, with the country arguing it needed to be able to maintain spending to preserve the fragile economic growth recovery.

Nikhil Sanghani, Latin America economist at Capital Economics, said that the deal — after months of “hardball” tactics — would bring “some relief to international bondholders in the near term”, though many issues remained.

“This is just the start of a long journey to fix Argentina’s macroeconomic imbalances, and there is still a lot that could go wrong over the coming years,” he said in a note.

Published in Dawn, January 29th, 2022

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