After months of negotiations, President Alberto Fernández announced 28/01/22 that Argentina has reached a credit agreement with the International Monetary Fund that will allow the country access to new financing and buy it time to help it repay its USD 44.5-billion debt.

Without this new agreement, Argentina would have been faced with repayments, between principal and interest, of more than USD 9 billion in 2022, as much in 2023, and about USD 4 billion in 2024. Totally unsustainable, and the country would have been declared in insolvency on 01/02/22.

Argentina has pledged to slowly reduce its fiscal deficit and cut the Central Bank’s financing of the Treasury as part of an economic programme agreed with the IMF.  The deal would also give Argentina at least a four-and-a-half year grace period before starting to pay back its debt.

According to Argentine representatives, the key points of the agreement are as follow:

1/ Argentina will aim for a primary fiscal deficit of 2.5% in 2022, 1.9% in 2023 and 0.9% in 2024,

2/ Plans to reduce Central Bank assistance to the Treasury to 1% of GDP in 2022, 0.6% in 2023, and “near zero” in 2024,

3/ Argentina will continue with FX policy currently in place, without large devaluation jumps,

4/ The plan targets USD 5 billion in additional foreign reserves in 2022,

5/ Government won’t seek labour reform or privatise public companies,

6/ Argentina will continue with price controls as part of its inflation strategy,

7/ Plan also targets positive real interest rates.

The agreement needs know to be approved by the Congress as well as by the board of Directors of the IMF. In summary, Argentina has done with the IMF the same thing it did in 2020 with private creditors: push the ball a little further ahead. To be followed…