Argentina announces a savings agreement with the IMF on its debt

Argentina on Friday announced a “reasonable” agreement on its debt with the IMF, the lifeblood of Latin America’s 3rd largest economy, facing a three-year “non-payment” repayment period of more than $ 19 billion by 2022.

“I would like to inform you that the Government of Argentina has reached an agreement with the International Monetary Fund,” President Alberto Fernandez announced in a brief speech.

“We had unpayable debt, it was gone for us without the present or the future. Now we have a fair deal that will allow us to grow through our growth and fulfill our obligations,” he added. After a three-year recession, Argentina returned to growth in 2021 (+ 10.3% in eleven months).

The government has been in talks with the IMF since coming to power in late 2019, and has been more active in recent weeks, re-negotiating the $ 44 billion debt contracted by the previous government (center-right) in 2018 by Mauricio Macri.

Without an agreement with the international body in Washington, Argentina would have to repay more than $ 19 billion in 2022, and more than $ 4 billion in 2023 and 2024 between capital and interest.

In the agreement on “extended tariffs”, much remains to be done: Economic Minister Martin Guzmn underlined that Argentina and the IMF technical committees “still need to work on MoUs, which will take a few weeks”. . In particular “the future timeline calendar (which) will be defined by the upcoming memorandum”.

– General Deficit: Gradual Reduction –

The IMF welcomed the “agreement on policy” and the “agreement on key principles”, according to its Managing Director, Crystalina Georgieva, to a plan supported by the International Monetary Fund to address and sustain current challenges such as inflation. More inclusive and sustainable development for the people of Argentina “.

“The staff of the IMF and the Argentine authorities will continue their work in the coming weeks,” he said, adding that the final agreement would have to be submitted to its board of directors for approval.

A key aspect of the negotiations that stumbled upon was the reduction of Argentina’s public deficit, the country’s long – standing ally. The agreement provides for a gradual reduction of 3% of GDP in 2021, 2.5% in 2022, then 1.9% in 2023 and then 0.9% in 2024.

He estimated that this objective would allow a budget policy to “prevent recovery” and allow the evolution of the structure “without adjustment” of the economy and public spending. Guzman. “This is the best deal we can reach,” said Joseph Stiglitz, a 39-year-old Nobel laureate.

Inflation, another local evil, both parties agreed, in the words of the IMF, “in the formulation of monetary policy as part of a multidisciplinary approach.” Mr. Guzman is a “multi-faceted” tone that is very cohesive.

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Throughout the negotiations, Argentina begged for “time” to respect its repayments, and these would not prevent a recovery.

– Agreement “at dawn” –

“The negotiations were very difficult,” said the man in the front row of the talks. “There was very strong political and technical work,” he added, referring to the agreement “reached at dawn”.

Mr. Guzman rejected the change in the exchange control regime that has been in place since 2019.

On the Argentine side, there are still some ways to implement it: the agreement must be integrated into the “government’s multi-year plan”, which must be approved by parliament, even if the ruling coalition is a minority. This forms the largest group.

There is also the question of social acceptance in Argentina of changes that are part of the reduction of public spending. In particular, the “progressive reduction strategy for subsidies in the energy sector” is considered “essential.”

On the street, the deal was greeted with a touch of skepticism by Argentines accustomed to debt. Juan Masetti, a 27-year-old accountant, told AFP that the deficit reduction would “not be achieved as it always has been.” But “it (this deal) had to be taken out because it’s getting complicated with the big payments coming in. It’s greatly reducing the country’s financial position.

The announcement comes on the same day that Argentina met its first 2022 repayment deadline of $ 700 million, up from $ 370 million on Tuesday. The minister confirmed on Friday that the money was “coming true”.