A lot of uncertainty still exists around how Argentine government policy will make the country’s sovereign debt sustainable, Alejandro Werner, the International Monetary Fund’s Western Hemisphere director, said during an April 8 webcast hosted by S&P Global Ratings.
The IMF and Argentina have been in conversation for months to restructure roughly $44 billion in debt the country agreed to assume in 2018 when former President Mauricio Macri’s administration was fighting a bourgeoning economic and currency crisis. The close of 2020 marked three straight years of recession in the South American nation, with the pandemic compounding its problems.
Any delays in the debt agreement would likely be due to political reasons, not technical hurdles, Werner said. Although the country restructured private debt last year, there are still “lots of uncertainties” as to which government policies will make the new debt sustainable, he added.
Argentina was expected to begin repayments in 2021, but with legislative elections scheduled for October, recent reports have suggested that the government could look to postpone the talks.
“There is an interpretation on our side that maybe the government feels that it will be much better to undertake this political negotiation after the elections than before,” Werner said. “It has to do much more on their willingness and assessment that it is the right time politically … to finalize the negotiation.”
Signs have mounted over the past few months that the parties might not reach an agreement by the original May target date.
“The debt we inherited, with the current terms, is unpayable,” Argentine President Alberto Fernández told a local radio station in late March. Fernández separately said he is looking for a deal that does not forget “the 40% of the population below the poverty line” and that has a repayment schedule of beyond 10 years.
The IMF’s Werner said the organization had “constructive” talks with Argentina’s finance ministry but added that there “seem to be significant differences of opinion” among President Fernández’s closest allies on which direction the country should take.
