By Rodrigo Garcia
Buenos Aires, Jan 28 (EFE).- Argentina said Friday that it reached an understanding with the International Monetary Fund (IMF) on rescheduling its debt to the international lender hours before Buenos Aires was due to make a $700 million payment.
“We had a noose around our neck, a sword of Damocles, and now we have a path we can follow. Without an accord, we had no prospect for the future. With this accord we can order the present and build a future” President Alberto Fernandez said.
The agreement, which must be ratified by Congress, does not require Argentina to impose austerity measures that would undermine economic growth or social policy, the center-left government said.
Besides a new schedule for repaying the $41 billion that Argentina still owes from the $44.5 billion borrowed in 2018 by conservative then-President Mauricio Macri, the accord includes access to new funding in conjunction with a 30-month program subject to quarterly review by the IMF, the economy ministry said.
While some of the new funding will go toward retiring the debt, a portion has been earmarked for bolstering the Argentine central bank’s depleted international reserves.
The economy ministry said the pact includes a grace period of 4 1/2 years before Argentina has to begin repaying the new loans.
“IMF staff and the Argentine authorities have agreed on the fiscal consolidation path that will form a key policy anchor of the program,” the Washington-based lender said in a statement.
“The agreed fiscal path would gradually and sustainably improve public finances and reduce monetary financing. Importantly, it would also allow for spending increases on infrastructure and science and technology, and would protect targeted social programs,” the IMF said.
News of the accord was received positively by Argentine financial markets.
The Buenos Aires stock exchange’s benchmark index climbed by 4.2 percent and the peso gained 4.27 percent against the dollar on the informal foreign exchange market.
The 2015-2019 Macri administration turned to the IMF after the Argentine peso plunged against the dollar despite desperate measures that included raising the benchmark interest rate to 40 percent.
In December 2020, at the end of his first year in office, Fernandez concluded that Argentina could not meet the repayment schedule amid the recession he inherited from Macri, which was only made worse by the Covid-19 pandemic.
Buenos Aires informed the IMF that the debt was unpayable on the original terms and the parties embarked on the negotiations culminating in Friday’s agreement.
During the 2003-2007 presidency of the late Nestor Kirchner, Argentina paid off its obligations to the IMF and successfully rescheduled most of the sovereign debt that forced Buenos Aires to default in early 2001.
The origins of the 2001 default, which was then the largest in history and occurred amid a financial meltdown and economic depression, went back to Argentina’s 1976-1983 military regime, which presided over a 465 percent expansion in public indebtedness.