IMF signals agreement with Argentina on debt restructure

28 Jan 2022 | Tim Worledge

The government of Argentina has reached a breakthrough agreement with the International Monetary Fund (IMF) to restructure its debt and provide further financial assistance to the troubled South American country.

A statement from the IMF confirmed agreement had been reached Friday, while Argentina’s President, Alberto Fernandez, went on television to announce the deal.

Local and international media reported that the agreement is worth $44.5 billion to help address runaway inflation and crippling currency issues, which have added to the country’s underlying fiscal problems.

“Governing is an exercise of responsibility,” Fernandez said in his televised address, describing the previous agreements with the agency as “a noose around our necks.”

“Without agreement we did not have a horizon on the future, with this agreement we can order the present and build a future,” the President said, promising that the deal did not force labour reform, reach a zero deficit, or reduce public services.

A more measured announcement from the IMF said the agency and representatives of the country’s government had reached an understanding on “fiscal consolidation.”

“Importantly, it would also allow for spending increases on infrastructure and science and technology, and would protect targeted social programs,” the IMF statement confirmed.

However, the deal does call for a strategy to reduce energy subsidies progressively.

Argentina is a major exporter of wheat, corn and soybean derivatives and has been struggling with a cocktail of challenges in recent years that had forced the controversial imposition of duties on export volumes. 

“They need it. It’s more important than changing taxes. We thought it would be announced in December, but I guess they are still figuring things out,” Terry Reilly of Futures International told Agricensus.

The country was believed to be close to defaulting on its existing agreements with the agency, with international news agencies prior to the agreement’s announcement highlighting a rapidly approaching deadline to repay $1.1 billion early next week.

Argentina has had a troubled relationship with the IMF, with the terms for previous bailouts deemed to be draconian by governments who have railed against the conditions that have been imposed on the funding.

But the country has been buffeted by another collapse in the value of its currency versus the US dollar, while also wrestling with surging domestic prices, the onset of pandemic and near-drought conditions across much of its productive lands.