Argentina has secured a $45 billion deal with the IMF to restructure debt from its record 2018 bailout, just weeks before the repayment deadline, it will be struggling to cash in on rapidly dwindling reserves.
IMF said in a statement on Thursday that the new 30-month expansion fund facility program outlined in the agreement would “address the country’s most pressing economic challenges” and improve public finances.
The Argentine parliament and the IMF board must approve the details of the agreement. Those details weren’t immediately available, though the fund said it “appropriately seeks to address persistently high inflation through a multi-pronged strategy that involves reducing monetary funding for fiscal deficits and a new framework for conducting monetary policy to yield positive real interest rates”.
Both sides have worry for a deal to restructure approximately $45 billion in debt to international lenders from a record $57 billion which Argentina initially agreed to borrow from the fund in 2018 under the former centre-right government of Mauricio Macri.
Martín Guzmán, Argentina’s finance minister and chief negotiator for the IMF, said the deal would be sent to the lower house as early as next week. If approved, payments to the fund will begin in 2026 and end with a full refund in 2034.
Securing a simple majority in parliament for the deal will be a major challenge for President Alberto Fernández, whose left-wing Peronist coalition lost key seats in last year’s midterm elections. .
The agreement with the IMF, the outline of which was first presented in January, revealed deep rift within the ruling coalition, a mix of presidential-aligned moderates and a radical wing led by Cristina Fernández de Kirchner, the country’s influential vice president and former leader.
While the IMF did not require any congressional approval to finalize the deal, Argentine law requires it.
Argentina will repay the IMF $19 billion this year under the terms of the original deal, including a $2.8 billion installment due on March 22, which analysts say it does not would be possible without a new agreement.
By some calculations, the central bank’s net reserves fell into negative territory after the government paid more than $1 billion in principal and interest to the fund in February. Inflation is above 50% a year.
Presidential spokeswoman Gabriela Cerruti said the main point of disagreement with IMF officials in Washington was the pace of increases in energy prices, which are heavily subsidized in Argentina, which accounted for about $11 billion last year.
For some consumers, electricity and gas prices will increase by 150% under the terms of the new deal, she said, which will be unpopular with opposition lawmakers, who must approve the deal.
“The issue of tariffs is one of the most intensely discussed and negotiated,” Cerruti said at a press conference in Buenos Aires on Thursday.
Fernando Iglesias, an opposition lawmaker, described the deal as “a ticking time bomb”. Economists have expressed skepticism about whether a divided and unpopular government facing elections next year can deliver on its promises and pass the assessments. regular fund or not.
