The president of Argentina announces a new credit agreement with the IMF

In 2018, during the Government of Mauricio Macri (2015 – 2019), the IMF (International Monetary Fund) granted Argentina a 44 billion dollars loan in the middle of a monetary crisis.

Now, the formal president of Argentina, Mr. Alberto Fernández, has started negotiations with the IMF to extend the payment due date. Mr. Fernandez is proposing to elaborate a repayment schedule with payments ranging from 2026 to 2034

The urgency to negotiate a new payment term derived from Argentina's fiscal deficit is currently facing.

According to the existing agreement, Argentina must pay approximately 18 billion dollars this year and 19 billion dollars next year to settle the debt amount. This is considered nearly impossible by the government and -viewing the fiscal deficit- could lead Argentina’s administration into bankruptcy.

Mr. Alberto Fernández proposed that if the IMF agreed to sign a new agreement with realistic payment terms, he would commit to reducing the fiscal deficit from 3% to 0.9% by 2024.

As stated by President Alberto Fernandez, “this new agreement will not accumulate new debt to the debt already taken by the previous government. It is a refinancing of that loan”.

Nevertheless, to alleviate the deficit of the Public Administration accounts that Mr. Alberto Fernandez is promising, Argentina’s governments have three options: increase in revenue to finance expenses, reduce expenses, or both.

In this context, claims and unconformities from civilians are unleashed since the increase of taxes in Argentina, and the lack of investment in infrastructure, health, education, or any other public service seems inevitable.

The Executive Board of the IMF will consider the agreement request after the approval of Argentina's Congress.

According to the Financial Times Magazine, on Friday, March 11, 2022- after 12 hours of debate, Argentina’s congress has voted in favor of a 30-month extended fund facility arrangement to restructure its debt with the IMF.

IA insight

Despite that the IMF has not approved the terms of the new agreement yet, -taking into account the developments of the negotiations- it seems that the IMF will accept them, which will avoid an economic crisis in Argentina.

However, attention should be given to how the agreement will impact Argentina’s economy, both within the country and internationally, since the government will most likely increase taxes and avoid investing in new projects. ?

Written by Claudia Espinoza and edited by Ana Paola Rodriguez

*This article is informative and is not to be used as legal, economic, or commercial advice.

Sources: Financial Times, IMF, DW 1, DW 2