Argentina Seeks to Reach a New IMF Agreement Before April
Argentina Seeks to Reach a New IMF Agreement Before April
(Bloomberg) -- Argentina aims to reach a deal with the International Monetary Fund over a new financing program before the end of March, according to a person with direct knowledge of the matter, a time frame that Fund veterans say is realistic if both sides show commitment.
The government, which sealed an initial $65 billion debt agreement with its private creditors Tuesday, will look to begin formal negotiations with the Fund after Sept. 4, which is the date in which the deal with bondholders will settle, the person said, asking not to be named because the talks are private.
The country’s goal is to have a new program before the end of the first quarter of 2021, so that it has enough time to renegotiate a $2 billion payment owed to the Paris Club and maturing in May, according to the person. The Paris Club is an informal grouping of 22 country lenders.
With the private debt renegotiation almost complete, President Alberto Fernandez is turning his attention toward the IMF as the country looks to reschedule over $44 billion in loans with its senior creditor and replace the stand-by credit line signed by the previous administration in 2018. Argentina may request to start the talks, a formal step necessary to kick off the negotiations, as early as this month, the person said.
“Whether negotiations have ‘begun’ or not, the Fund and Argentina are talking all the time,” said Mark Sobel, a former U.S. representative at the IMF now at the Official Monetary and Financial Institutions Forum think tank. “March is a long, long way from here. If both parties are willing to do their parts, then a program by March is easily reachable, if not far, far sooner.”
Still, government officials have publicly said they will take their time.
“There is no rush to start negotiations with the IMF,” said Argentina’s cabinet chief Santiago Cafiero in an interview with local TV Publica station late Wednesday. The Fund “has been frank in its understanding of the limits of Argentina’s socioeconomic limits; we hope that will continue.”
A spokesman from the Economy Ministry declined to comment. The IMF stands ready to support Argentina, including engaging with the authorities on a new program when they desire it, but at this stage no request has been made, a spokesman for the Fund said.
One of the principles of the Paris Club is that it only considers negotiating its loans with countries that have a current facility with the Washington organization, according to its website. Argentina was supposed to make the $2 billion capital and interest payment in May, but requested to postpone it by a year.
The country’s principal repayments to the Fund don’t begin until the third quarter of next year. It remains to be seen if Argentina will seek to roll over its existing debt into a new version of the same stand-by deal or into a longer-term program that requires more reforms, called an extended fund facility.
Argentina canceled the previous standby-arrangement with the Fund, and would seek a new “very distinct” agreement, Economy Minister Martin Guzman said Tuesday after the creditor deal was announced.
IMF Managing Director Kristalina Georgieva praised the deal in a tweet that day, calling it a “significant step.”
Based on Georgieva’s approach since taking the helm of the Fund in October, the IMF “will be more sympathetic to the politics of this government than may have been the case in the past,” said Douglas Rediker, another former U.S. representative and a senior fellow at the Brookings Institution. “The Fund has strong incentives to ensure a new program is in place to allow for its own exposures to be repaid starting next year.”
“Argentina program conditions are never looked upon with great favor in country, so this won’t be easy,” he said. “But as far as timing, it could all be concluded relatively quickly, given the IMF already has a deep understanding of the situation on the ground. The question will be of the will to agree, not the speed of negotiations.”
©2020 Bloomberg L.P.