IMF Says Argentina’s Debt Levels ‘Unsustainable’ After Review

IMF Says Argentina’s Debt Levels ‘Unsustainable’ After Review

18:00 - Argentina’s debt load is unsustainable, the International Monetary Fund said after completing a week of meetings in the country, paving the way for the government to ask private bondholders to take on losses as it prepares to renegotiate its obligations.

A “meaningful contribution” will be necessary from private bondholders to restore the country’s debt sustainability, the IMF wrote in a statement Wednesday following talks with Argentine officials during its first technical mission in Buenos Aires under Alberto Fernandez’s presidency. 

“The primary surplus that would be needed to reduce public debt and gross financing needs to levels consistent with manageable rollover risk and satisfactory potential growth is not economically nor politically feasible,” the Fund said.

Fernandez is seeking to renegotiate billions of dollars in debt with private creditors, including a $56 billion loan with the Washington-based organization. The last time IMF officials commented on Argentina’s debt was in the fourth review of the credit line in July 2019, when they called it “sustainable, but not with a high probability.”

Argentina’s record IMF loan has been on hold since August after Fernandez pulled off a shock upset of incumbent Mauricio Macri in a presidential primary vote, sending markets reeling.

“IMF staff emphasized the importance of continuing a collaborative process of engagement with private creditors to maximize their participation in the debt operation,” according to the statement. Debt rose to nearly 90% of gross domestic public at the end of 2019, the Fund said.

Guzman warned investors last week they’ll probably be frustrated with negotiations, which he intends to wrap up by the end of March. South America’s second-largest nation owes over $38.7 billion to bondholders just this year, and payments peak in May.

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