IMF welcomes Argentina’s latest debt swap amid renegotiation efforts

“We certainly welcome the authorities' efforts to reduce rollover risks associated with domestic debt.”

International Monetary Fund (IMF) spokesperson Julie Kozack said today that the lender welcomed Argentina’s announcement for a debt swap as it is discussing “alternatives” to “strengthen” the country’s Fund-supported economic program.

“On the issue of the debt exchange, what I can say is that we certainly welcome the authorities’ efforts to reduce rollover risks associated with domestic debt,” Kozack said today during a press briefing in Washington, DC. “While also ensuring that these operations are conducted in a manner that protects debt sustainability and does not add to vulnerabilities down the road”

This week, the Economy Ministry launched a voluntary debt swap that aims to defer approximately AR$ 9.2 trillion in debt maturing between June and September 2023, to 2024 and 2025.

“These efforts are part of our ongoing discussions with the authorities,” Kozack added.

In March 2022, Argentina signed an agreement renegotiating the US$ 44 billion debt former President Mauricio Macri acquired in 2018. The deal includes an economic program with certain targets that Argentina must comply with to receive disbursements or payments every three months, which are used to pay for the previous debt with the IMF.

As per the current schedule, the IMF staff’s fifth review of the program, evaluating Argentina’s performance until March, is due on Friday. If favorable, the review could lead to a US$4 billion disbursement.

“The focus of the discussions of the fifth review has been on alternatives to strengthen the authorities’ program, while also recognizing the impact of the drought on the economy,” Kozack said.

The Economy Ministry is currently negotiating changes in the program’s goals —such as international reserve accumulation targets— and the possibility to use part of the IMF’s disbursements to intervene in the secondary bond market to suffocate currency runs, an official source told the Herald. However, the government does not consider the current agreement to have fallen through.

The Ministry considers that the lender has its eyes trained on the result of the debt swap and is even evaluating bringing forward at least part of the debt payments due on June 21 in a show of good faith during the renegotiation process.

Economy Minister Sergio Massa could travel to Washington, DC to close the renegotiations after the national holiday of June 20.

Like Kozack, the Economy Ministry also considers the drought to be a focal point in the program renegotiation, as it calculates that the drought slashed some US$18 billion in crop exports.

According to Kozack, the IMF and the Argentine government are having “discussions on policies to safeguard stability, enhance fiscal sustainability, and strengthen reserves in the country.” 

“Each of these are essential to reduce inflation and ultimately protect the most vulnerable members of society who are often those most affected in these challenging economic times”.


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