President-elect Alberto Fernández said Tuesday he will make good on Argentina's debt payments but without new austerity measures because people in his country are already hard-pressed financially.
"We cannot make more fiscal adjustments because the situation is enormously complicated," Fernández, a centre-left Peronist, said in a statement after speaking with IMF chief Kristalina Georgieva in their first publicly known phone call.
The former Cabinet chief reportedly told Georgieva in a call that he has a plan to grow the economy and to tackle the nation’s debt. President Mauricio Macri last year negotiated a US$57-billion bailout from the IMF to halt a devastating currency skid.
"We have developed a sustainable plan that will allow us to grow and comply with our obligations that Argentina has with you and with the rest of the creditors,” Fernández told Georgieva, according to his transition team’s press statement. “We’re taking on a commitment that we can meet.”
Fernández, who takes office December 10, said he well understood the “relevance” of "fiscal viability," quoting words delivered by the IMF chief a day earlier.
The IMF granted Argentina a record line last year after President Mauricio Macri sought aid following a rout of the peso. To meet targets in the deal and receive IMF cash, Macri had to accelerate painful spending cuts. But the aid didn’t get the economy back on its feet: Inflation is over 50 percent, unemployment is above 10 percent, and a third of Argentines live below the poverty line. The economy is expected to shrink by 3.1 percent this year, according to the IMF.
Argentina’s economic pain since the agreement began in June 2018 has evoked the unpleasant memory of the nation’s last major economic collapse in 2001, when it defaulted on US$95 billion in debt after another IMF agreement fell apart.
Fernández, with former president Cristina Fernández de Kirchner as his running-mate, defeated Macri in October elections.
The return of the Peronists has prompted fears that Argentina might not live up to its debt obligations. The government has important debt payments coming up next year, both of principal and interest.
The Macri administration says that as of the second quarter of this year Argentina's debt totalled US$336 billion, or 80 percent of GDP.
Georgieva told Bloomberg in an interview Tuesday that “the government has to figure out a way to live within budgetary constraints,” and “they will have to bring debt to a sustainable level so they can return to markets.”
In a statement Tuesday evening, Georgieva called the phone call “constructive.”
"During our conversation, we talked about Argentina's economy and Mr. Fernández’s views on the country's main challenges going forward," the IMF chief said in a statement.
“I stressed the IMF’s readiness to engage with his government and work towards paving the way for sustained growth and poverty reduction. We agreed to pursue an open dialogue for the benefit of the Argentine people.”
According to Fernández’s statement, Georgieva said on the call she was “very anxious” to know more details about Frente de Todos' economic plan and moved by his priorities to fight poverty and hunger. She said she’s very interested in learning more about Fernández’s looming social pact to lower inflation, the transition team said.