A delegation from the International Monetary Fund (IMF) is expected to arrive in Buenos Aires today to negotiate repayment terms on a $57 billion sovereign debt facility.
In August, Argentine Finance Minister Martin Guzman successfully renegotiated a restructuring of $65 billion in debt that Buenos Aires owed to private creditors. Argentina secured $38 billion in concessions, including four-years of minimal-payment breathing room and an agreement to slash interest payments from 7% to 3% over. Nonetheless, global investors have little confidence in the country’s long-term economic prospects. The IMF team will ask for complete financial transparency from Buenos Aires as they are beholden to $44 billion of the $57 billion facility, and their portion maintains the stability of Argentina’s total of over $300 billion in debt.
With an IMF-projected GDP contraction of 12% this year, a widening gap between the official and real exchange rate of the peso, and increasing capital controls to maintain Argentine foreign reserves, even September’s $65 billion restructuring may not be enough to secure Argentina’s fiscal health. Although the country has temporarily avoided default, Argentina has no sustainable solution to its debt problems. If the government can’t reach a deal with the IMF and does not propose a viable medium-term monetary and fiscal plan that makes realistic post-pandemic economic growth projections, the prospect of debt default and a repeat of this situation is all but ensured to happen again four years from now.
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An international finance and strategy professional, Niko serves on the Current Developments Team with a focus on global business and policy trends in order to understand the key drivers of international investment. Niko's specific interests are in energy, emerging and frontier markets, and trade policy; he contributes regularly to the Daily Brief