Argentina’s country risk climbs due to doubts in compliance with IMF agreement

RIO DE JANEIRO, BRAZIL – Argentina’s country risk exceeded 1,900 basis points due to doubts about Argentina’s ability to comply with the conditions of the agreement signed with the International Monetary Fund (IMF), in an international context in which investors seek refuge assets and avoid risky.

The indicator that measures the difference between what the United States Treasury bonds pay against those of Argentina opened this Tuesday at 1,936 basis points, the highest level since last March, which in fact means that the South American country has closed the debt market despite having carried out a restructuring of private debt in 2020 and having signed an agreement with the IMF last March.

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“The agreement with the IMF did not work as an anchor for expectations or as a guarantee for the return to voluntary credit markets” and “Argentine Global bond parities average 30 cents, and are the lowest since the exchange of debt of 2020″, said the head of Strategy of GMA Capital, Nery Persichini.

“Although the program with the IMF seemed lax in terms of the goals, the macro deterioration, with the highest inflation in 30 years, would make it difficult to meet the demands of fiscal deficit, monetary assistance and accumulation of reserves,” Persichini explained.

The expert added that the political crisis within the government coalition “induces an extra dose of uncertainty”, referring to the differences between the Argentine president, Alberto Fernández, and the Kirchnerist wing led by the vice president and former president Cristina Fernández de Kirchner (2007 -2015), on economic policy.

Argentina signed an extended facility agreement with the IMF last March, which allows it to refinance debts of some US$45 billion and involves applying fiscal and monetary policies with the aim of reducing the economic imbalances of the South American country.

The agreement establishes a gradual reduction of the primary fiscal deficit, from the equivalent of 3% of the Gross Domestic Product (GDP) in 2021, to 2.5% this year, 1.9% in 2023 and 0.9% in 2024, an assistance monetary policy by the Central Bank to the Treasury goes from the equivalent of 3.7% of GDP in 2021 to 1% this year, as well as increasing net international reserves by US$5.8 billion in 2022.

However, the market doubts that Argentina can meet the agreed goals.

The IMF itself admitted that it could revise the assumptions of the program due to the new shocks in the global economy, which is expected to affect the inflation rate expected in the program to a range of 38%-48% in 2022, which has already been outdated with the 58% year-on-year it reached last April.