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Argentina strikes deal with creditor countries to avoid July default

Argentina said it had reached an agreement with the Paris Club of creditor countries to avoid defaulting on a loan repayment.

Argentina
Buenos Aires. — Photo: © Ronaldo Schemidt/AFP/Getty Images
Buenos Aires. — Photo: © Ronaldo Schemidt/AFP/Getty Images

Argentina said Tuesday it had reached an agreement with the Paris Club of creditor countries to avoid defaulting on a loan repayment in July, unlocking temporary relief of some $2 billion.

“We have reached an understanding with the Paris Club” to avoid defaulting on July 31, when a grace period was to expire for the repayment of a final tranche of debt of about $2.4 billion, Economy Minister Martin Guzman told reporters.

Instead of $2.4 billion, Argentina will repay $430 million in the short term, followed by the rest later.

The $2.4 billion was the last repayment on debt renegotiated with the Paris Club in 2014.

Paying the amount, said Guzman, “would have been a blow to international reserves, (and) would have generated more exchange rate instability and more macroeconomic instability.”

A default, on the other hand, would have similarly been a hard blow to the economy.

The new repayment dates have not been defined, Guzman added, but the first would likely be by July 31 and the second in 2022.

Argentina will continue negotiations for repayment of some $44 billion borrowed from the International Monetary Fund by the previous government in 2018.

“Our goal is to have a good agreement, the sooner the better, but the priority is that it be good,” said Guzman.

Argentine President Alberto Fernandez visited European countries in May to drum up support for a delay in its debt repayments to the Paris Club and IMF.

In March, he said the debt in its current form was “unpayable.”

Argentina has been in recession since 2018, a situation worsened by the coronavirus epidemic. In 2020, GDP declined nearly 10 percent and poverty now affects about 42 percent of the population.

Last year, the country restructured some $66 billion in debt.

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