Economy Minister Martín Guzmán announced Tuesday that Argentina had reached an agreement with the Paris Club of creditor countries to avoid defaulting on a loan repayment in July and unlocking temporary relief of some US$2 billion.
"We have reached an understanding with the Paris Club" to avoid defaulting on July 31, when a grace period was to expire for the repayment of a final tranche of debt of about US$2.4 billion, Guzmán told reporters in the capital. “This new time horizon gives us more security.”
Instead of US$2.4 billion, Argentina will repay US$430 million in the short term in a number of payments, followed by the rest later, said the minister. The amount owed was the last repayment on debt renegotiated with the Paris Club in 2014.
"Paying that amount would have been a blow to international reserves, it would have generated more exchange rate instability and more macroeconomic instability. On the other hand, a default, a situation of default, would also have been a blow to the economy," said the minister.
Guzmán pointed out that the new payment dates were not yet fully defined, though it is likely that the first payment would take place on July 31, with the second in 2022.
"Argentina will have until March 31, 2022 to aim for a more permanent restructuring with the Paris Club and will continue its efforts to reach an understanding with the International Monetary Fund," the minister said.
Argentina will continue negotiations for repayment of some US$45 billion it owes the International Monetary Fund. In-person talks with IMF representatives will continue on the sidelines of a G20 summit in Italy in July, said Guzmán.
The Paris Club developments mean that Argentina is now committed to reaching a deal with the IMF by the end of March 2022, as it has agreed to treat all other external creditors in a comparable manner, said Paris Club General Secretary Schwan Badirou-Gafari this week, responding to an enquiry from Bloomberg.
Argentina entered the debt’s 60-day grace period to reach an understanding with the informal group of creditors after requesting more time to work out an arrangement. Guzmán said Tuesday, however, that the March 2022 deadline with the Paris Club won’t have any impact on the timeline for IMF negotiations.
"Our goal is to have a good agreement, the sooner the better, but the priority is that it be good," said Guzmán, who insisted the IMF shared some responsibility for Argentina's indebtedness.
President Alberto Fernández visited a number of European countries in May to drum up support for a delay in its debt repayments to the Paris Club and IMF. In March, he said the debt in its current form was "unpayable."
Argentina has been in recession since 2018, a situation worsened by the coronavirus epidemic. In 2020, GDP declined nearly 10 percent and poverty now affects about 42 percent of the population.
Last year, the country restructured some US$66 billion in debt with private bondholders.