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ECONOMY | 23-03-2022 15:39

Postponement of Paris Club debt payment gives breathing room to government

Argentina's government has secured an extension of an agreement with the Paris Club group of rich nations that allows it to postpone an imminent payment of about US$2 billion.

Argentina's government has secured an extension of an agreement with the Paris Club group of rich nations that allows it to postpone an imminent payment of about US$2 billion.

The postponement, agreed before the International Monetary Fund’s Executive Board votes on a new credit programme to restructure Argentina’s US$45-billion debt with the multilateral lender, grants extra breathing room to the government, which said it could not make the Paris Club payment. 

"Prior to the vote of the Executive Board of the International Monetary Fund, Economy Minister Martin Guzman held a meeting with the president of the Paris Club, Emmanuel Moulin, in which the parties agreed on a new extension of the understanding reached in June 2021," an official statement released on Tuesday read.

Last year, Argentina agreed with the Paris Club to postpone the pending payment of some US$2 billion until March 31, 2022, while it negotiated the rescheduling of its debt with the IMF. 

The payment corresponds to the final tranche of a debt that Argentina had already renegotiated back in 2014.

"The agreement includes financial guarantees from the Paris Club in support of the 30-month Extended Facilities programme, allowing Argentina to secure the financial sources identified in the agreement with the IMF," the Economy Ministry said in a statement.

Argentina's Congress last week approved an extended fund facilities (EFF) programme with the IMF to restructure its debt. 

"During the lifespan of the programme, Argentina will make partial payments to [Paris] Club members in proportion to those made to other bilateral creditors," the statement added.

Once the new EFF agreement is ratified by the IMF’s board, Argentina will receive a first disbursement of about US$9.8 billion, which will allow it to repay a maturity of about US$2.9 billion by March 31 and strengthen international reserves.

Although Argentina's gross reserves currently stand at around US$37 billion, liquid reserves are at such critical levels that they do not allow for due payments to the Paris Club and the IMF to be made, according to the Central Bank.

 

– TIMES/AFP
 

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