President Alberto Fernández has unveiled what he calls a "reasonable" new debt repayment deal with the International Monetary Fund, a key step in his government's efforts to stabilise Argentina's economy.
According to the terms of the 2018 credit-line signed with the Mauricio Macri administration, Argentina was due to pay back US$19 billion of its US$44-billion debt to the IMF this calendar year. The country then faced repayments of US$20 billion next year and a further US$4 billion in 2024.
"Compared to previous ones Argentina signed, this deal does not include restrictions that would delay our development," said Fernández on Friday, the day a US$730-million payment was due. Another US$370 million needed to be paid on Tuesday.
Fernández's government had repeatedly said the repayment schedule was unsustainable given their lack of reserves, and was pushing to restructure the timetable.
"We had an unpayable debt that left us without present or future, and now we have a reasonable deal that will allow us to grow [the economy] and fulfill our obligations throughout our growth," said the Peronist leader. "This understanding plans to sustain the economic recovery that has already begun."
Argentina remains mired in an economic crisis, though, with inflation at 50 percent and poverty over 40 percent.
International Monetary Fund Managing Director Kristalina Georgieva said she was "encouraged by today’s progress between IMF staff and Argentina’s authorities."
Fernández said the deal crucially would not force the government to reduce public spending and would allow it to increase investment in public works, factors he hope will calm the concerns of opponents in his ruling coalition. Hardline Kirchnerite lawmakers had even floated the idea of default this week, suggesting it would not be the worst outcomes.
Under the new deal, Argentina has committed to progressively reducing its fiscal deficit from three percent in 2021 to just 0.9 percent in 2024, Economy Minister Martín Guzmán confirmed later at a press conference. The gradual reduction – to 2.5 percent in 2022 and 1.9 percent in 2023 – would "not prevent the recovery" of the economy, said the minister.
It would also allow for public spending to evolve "without an adjustment," a reference to austerity measures. The government has enforced strict exchange controls since coming to power in 2019.
Argentina has also agreed to reduce monetary emission, trim the Central Bank's assistance to the National Treasury. In 2021, monetary financing to the Treasury ended at around 3.7 points of GDP, which was a reduction from the 7.3 points of monetary financing, recorded at the worst moment of the pandemic in 2020," said the minister.
The government will also "strengthen tax administration" and "attack tax evasion and implement measures to attack the problem of money-laundering," added Guzmán.
The new deal provides for a US$5-billion increase in Argentina's international reserves, which currently stand at about US$38 billion.
The agreement must still be ratified by Congress, where the governing coalition – despite being the single largest party – is still in the minority.
"The negotiations were really difficult," said Guzmán, who has led the government's efforts. "We worked very hard politically and technically."
"It is the best agreement that could be reached," he concluded.
If passed, Argentina will be subjected to quarterly reviews by the Fund's officials.
10 years for repayments
In 2018, former president Mauricio Macri agreed a record US$50-billion stand-by agreement with the IMF, which was later extended to US$57 billion. But the loan, the largest in the Fund's history, did not stabilise Argentina's economy. When Fernández took office in December 2019, he refused to accept the final US$13-billion disbursement.
After successfully restructuring a US$66-billion debt with private international creditors in 2020, Argentina began negotiations with the IMF to delay repayments.
Guzmán said the new agreement would not be ready for a few weeks as the two sides needed work on the "memorandums of understanding."
But he said the repayments would start four years after the agreement is finalised and end six years after that.
From the beginning, the government insisted that the path to reducing its fiscal deficit was through economic growth rather than reducing public spending.
Macri had introduced unpopular austerity measures to comply with the terms of the IMF bailout, but despite initial signs these were stabilising the economy, he was unable to halt soaring inflation and poverty.
The country experienced three years of recession until registering a 10 percent increase in GDP in 2021, although the economy had shrunk by as much the previous year as it suffered the worst effects of the coronavirus pandemic.
Argentina has a long history of defaults, including the largest in history when in 2001 it defaulted on US$100 billion.