Recession-hit Argentina on Tuesday announced that it has reached an agreement with three major creditors over the restructuring of a US$66 billion debt, which the IMF described as a “very significant step” to solving its latest sovereign default crisis.
The government of Argentine President Alberto Fernandez had set a deadline of Tuesday to complete a deal, but it has now pushed the date to Aug. 24 “to give effect to the agreement,” which came after months of wrangling and extensions.
“We resolved an impossible debt in the biggest economic crisis in memory and in the midst of the pandemic,” Fernandez said. “Now the horizon is clear for where we want to go to.”
IMF managing director Kristalina Georgieva congratulated Fernandez on Twitter, adding: “Look forward to a successful conclusion in the interest of all.”
The Argentine Ministry of Economy said in a statement that the deal “will allow members of the creditor groups and such other [bond] holders to support Argentina’s debt restructuring proposal and grant Argentina significant debt relief.”
The bonds, issued under foreign legislation, represent about one-fifth of the country’s US$324 billion debt, which amounts to about 90 percent of its GDP.
Argentina has been in default — for the ninth time in its history — since May 22 when the country missed a deadline to pay US$500 million in interest on the debt that is subject to the current negotiation.
It missed another deadline last week to pay US$600 million more.
The deal involves the Ad Hoc, Argentina Creditor Committee and Exchange Bondholder groups, as well as “certain other significant holders,” the ministry said.
The creditors said in a statement they were “happy to have reached a preliminary agreement” that would “provide the country the economic relief necessary for a sustainable path that is needed due to COVID-19.”
The payment dates on new bonds have been brought forward by a couple of months “without increasing the aggregate amount of principal payments or interest payments that Argentina commits to make,” the ministry said.
Argentina has also agreed to advance the maturity dates for its bonds issued in 2005, 2010 and 2016.
“The economic issue is resolved, we just need to see the legal aspects in detail,” analyst Sebastian Maril said.
Although Argentina lost its access to international markets two years ago, reaching a deal with creditors is key as the country looks to also renegotiate the repayment of a US$44 billion bailout loan it has received from the IMF.
Former Argentine president Mauricio Macri had negotiated a US$57 billion loan from the IMF, but Fernandez suspended the remaining US$13 billion in disbursements when he took office in December last year.
“This agreement should help to bolster investor, business and possibly consumer confidence in Argentina in the near term,” Sanghani said. “Moreover, the deal is likely to pave the way for a renewed agreement between the IMF and Argentina’s government.”
As well as its commitments to international creditors, Argentina must resolve the situation surrounding a US$41.7 billion debt issued under national legislation whose payments have been deferred until December next year.
Fernandez’s government has offered similar conditions to those agreed with the international bondholders.
In recession since 2018, the Argentine economy — Latin America’s third-largest — has been further punished by the COVID-19 pandemic.
The IMF estimates it will contract by 9.9 percent this year.
More than one-third of the 44 million population live in poverty and annual inflation stands at more than 50 percent.
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