(Buenos Aires) Argentina announced Friday a “reasonable” agreement on its debt with the IMF, a lifeline for the third economy of Latin America, which faced “unpayable” maturities of repayment over three years, including more than 19 billion dollars from 2022.
Posted at 1:10 p.m.
“I want to announce to you that the government of Argentina has reached an agreement with the International Monetary Fund,” declared in a brief speech the president (center left) Alberto Fernandez.
“We had unpayable debt that left us with no present or future, and now we have a reasonable deal that is going to allow us to grow and meet our obligations through our growth,” he added. Argentina returned to growth in 2021 (+10.3% over 11 months) after three years of recession.
The government has been in dialogue since it came to power at the end of 2019 with the IMF, still intensely in recent weeks, to renegotiate a debt of 44 billion dollars contracted in 2018 by the previous government (center right) of Mauricio Macri.
In the absence of an agreement with the international institution in Washington, Argentina would have been faced with repayments, between capital and interest, of more than 19 billion dollars in 2022, as much in 2023, and around 4 billion in 2024.
In the agreement on “extended payment facilities”, much remains to be done: technical teams from Argentina and the IMF will have to “still work on the memorandums of understanding and this will take a few weeks”, underlined the Minister of Economics Martin Guzman. In particular “the schedule of future maturities [qui] will be defined by future memoranda.
Public deficit: gradual reduction
The IMF itself hailed “an agreement in principle”, an “agreement on key policies”, with a view, according to its managing director Kristalina Georgieva, “to an IMF-supported program to meet current challenges such as inflation and ensure more inclusive and sustainable growth for the Argentine people”.
“The staff of the IMF and the Argentine authorities will continue their work in the weeks to come”, and the final agreement will have to be submitted for the approval of its board of directors, specified the institution.
A key point, on which the negotiations stumbled, is the reduction of the Argentine public deficit, a chronic vice of the country. The agreement provides for a gradual reduction of 3% of GDP in 2021 to 2.5% in 2022, then 1.9% in 2023, then 0.9% in 2024.
This objective allows a budgetary policy “which does not prevent the recovery” economic and an evolution of the public expenditure “without there being adjustment” structural, estimated Mr. Guzman. “This is the best agreement we could reach,” said the young (39) minister, Nobel disciple Joseph Stiglitz.
On inflation, another endemic evil, the two parties agreed “on a monetary policy framework, as part of a multi-pronged approach”, in the words of the IMF. A “multicausal” tone to which Mr. Guzman is very attached.
Agreement “at dawn”
“The negotiations were really difficult,” said the man who was on the front line of the talks. “There was very strong political and technical work,” he added, referring to an agreement “reached at dawn” on Friday.
Throughout the negotiations, Argentina pleaded to obtain “time” to honor its reimbursements and that these do not stifle the recovery.
Mr. Guzman also ruled out a change to the exchange control regime in force since 2019.
On the Argentinian side, implementation still has some way to go: the agreement must be integrated into a “multi-annual government program”, which must be approved by parliament, where the ruling coalition is in the minority, even if it is the largest group. most important.
The question also remains of the social acceptance in Argentina of the adjustments that will be part of the reduction in public spending. In particular the “strategy of gradual reduction of subsidies in the energy sector”, deemed “essential”.
On the streets, the deal was greeted with a touch of skepticism by Argentines accustomed to debt. Deficit reduction “will not be achieved, as it always has been,” said 27-year-old accountant Juan Mazzetti. But “we had to get it out [cet accord] because it was getting complicated with big payments coming. It relieves the country’s finances a lot ”.
The announcement comes the same day Argentina was due to meet its first 2022 repayment deadline of $700 million, ahead of $370 million on Tuesday. The minister confirmed that Friday’s payment was “coming true”.