Argentina: seven keys to the agreement with the IMF to refinance its enormous debt

“We had a rope around our neck and now, a way to go,” said the president of Argentina, Alberto Fernández, this Friday announcing an agreement with the International Monetary Fund (IMF) to refinance the debt for US$ 44,500 million contracted in 2018.

Since 2020, Argentina had been in a tough negotiation with the IMF to refinance the debt that the country assumed during the government of Mauricio Macri in the midst of a currency crisis.

The South American country said on Friday it had reached a deal with the IMF on a new program to replace a failed $57 billion loan from 2018, dispelling rising tensions of a potential default, with major payments due this week. anus.

This year some US$19 billion were due – half of the Central Bank’s reserves – and in the first quarter alone the country had to cancel US$3.9 billion, a commitment that, according to the authorities of the South American country, was impossible to satisfy in a context in which that the COVID-19 pandemic hit the nation’s finances hard.

In parallel, the IMF reported that the parties reached “understandings on key policies as part of their ongoing discussions”, but stressed that the talks will continue in the coming weeks to achieve “a technical agreement”.

To enter into force, the agreement must now be approved by Argentina’s congress and the IMF’s executive board.

BBC News drew up a list with the seven keys to the agreement:

1- Gradual reduction of the fiscal deficit: Argentina committed to meet a primary fiscal deficit target of 2.5% of GDP in 2022; 1.9%; in 2023 and 0.9% in 2024.

2- Lower monetary issue, control of capital flight and increase international reserves.

3- Increased spending on infrastructure and science and technology and would protect targeted social programs, one of the points that Kirchnerism demanded within the Frente de Todos.

4- Progressive reduction of energy subsidies.

5- Implementation of monetary policy as part of a multiple approach to deal with high and persistent inflation.

6- Additional financial support from Argentina’s international partners.

7- Move towards a structure of positive real interest rates and in the reconstruction of the public debt in local currency.

The agreement will last for two and a half years, practically the remainder of Fernández’s mandate, with quarterly reviews.

It is worth remembering that the third largest economy in Latin America, Argentina joined the IMF in 1956, during the dictatorship of General Pedro Aramburu (1955-58). Since then the country has signed more than 20 plans with the multilateral organization.

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