RIO DE JANEIRO, BRAZIL – The evolution of the Argentine economy in 2022 is tied to the restructuring of the debt of US$44 billion contracted with the International Monetary Fund (IMF) in 2018.
With the international organization, the country, badly hit after three consecutive years of recession, cannot face maturities for $19 billion expected for next year. For this reason, the country must negotiate a new payment schedule, racing against the clock. As reported this week by President Alberto Fernández to business people, the new goal is the first quarter of next year.
“I met with the minister [de Economía argentino Martín] Guzmán and the commitment is to work constructively. We have to find a good point of agreement, where the deal is credible and valuable for Argentina,” said the head of the IMF, Kristalina Georgieva, hours after the meeting, without giving further details.
For Georgieva, the new program negotiated by the Fund aims to find “a path for Argentina to have firm policies to induce private growth, generate genuine employment and focus public spending.”
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Argentina holds legislative elections on November 14, in which it will elect half of the new members of the Chamber of Deputies and a third of those of the Senate. After the stagnation of the dialogue at the beginning of the year, economists took it for granted that the Fernández government would delay the agreement until after the electoral appointment to have a free hand on public spending and fiscal deficits.
But a month before the elections, there was no new insight. During a lunch with the country’s leading businessmen on Tuesday, the president reiterated that the talks “are on track”, but they do not plan to close a restructuring pact until the first months of 2022.
The latest round of dialogue began this week in the United States. Guzmán described the meeting with Georgieva on Tuesday as “valuable” and underlined his support for the head of the IMF amid the internal crisis opened in the organization for the investigation opened against her in the face of an alleged favorable treatment towards Beijing during her time in the World Bank.
“When you have more debt in dollars, it means fewer possibilities of expansion of economic capacity and more inflation. There is less growth and more inflation when dollars are lacking,” Guzmán said in an interview released this Wednesday at the Idea business conference.
“We have to solve it,” he stressed before criticizing the previous government, led by the conservative Mauricio Macri, for having requested a loan from the IMF that was impossible to repay under the agreed conditions.
The IMF approved in mid-2018 a loan of US$56.3 billion to Argentina after a sudden capital flight accelerated the depreciation of the peso. After winning the presidential elections in October 2019 from Macri, Alberto Fernández declined to accept more funds than the $44 billion already received up to that moment and announced that he would seek to renegotiate the payment schedule.
In September, Argentina paid a mature debt of more than $1.8 billion. It must face another one in December, but the bulk of payments are concentrated in 2022 and 2023, with disbursements of more than $19 billion per year. The lack of access to financing in international markets prevents it from meeting these commitments.
The Fernández government intends to close an agreement for extended facilities with lower interest rates and payment terms of at least ten years. The pact reached with the IMF must later be ratified by the two Argentine legislative chambers.
Negotiations with the IMF have increased tensions within the ruling Frente de Todos coalition. Vice President Cristina Fernández de Kirchner favors an increase in public spending that Guzmán opposes, due to its impact on an economy with severe macroeconomic imbalances, including one of the highest inflation rates in the world, which in 2021 is expected to approach again at 50%.