Argentina Avoids Debt Default With Paris Club

Argentina has reached a deal to avoid another default by delaying the bulk of a $ 2.4 billion payment owed to a group of rich countries by the end of July, the minister said on Tuesday. Economy Martín Guzmán.

Argentina now has until the end of March to strike a deal with the so called Paris Club from 22 countries, including the United States, Germany, Japan and France.

Guzmán said Argentina would only pay $ 430 million in two installments before that date, the first before July 31, when the 60-day grace period for the payment of $ 2.4 billion originally due. May 30 ends. The deal would effectively save the country $ 2 billion over the next eight months, Guzmán said.

The deal will give Argentina’s struggling economy some breathing space, with foreign exchange reserves significantly depleted despite the boost from soaring commodity prices in recent months.

“Solving the problem of our unsustainable debt is a fundamental pillar in the process of restoring economic stability,” Guzmán said at a press conference in Buenos Aires. He said it would also help reduce annual inflation, which is nearly 49%.

The agreement with the Paris Club comes as negotiations have stalled on repaying the $ 45 billion the IMF has loaned to Argentina since the 2018 monetary crisis under the previous government of Mauricio Macri.

Local analysts say talks with the IMF stalled due to political considerations, with midterm elections approaching in November, when the government won’t want to be crippled by the severe budget cuts agreed with the lender multilateral.

Although Argentina was initially expected to reach a deal with the IMF as early as last year – shortly after a successful restructuring of some $ 65 billion owed to private creditors – the absence an agreement containing a commitment to reduce the country’s inflated budget deficit had complicated talks with the Paris Club.

“Paying that amount would have hit international reserves and created more instability for the exchange rate and macroeconomics in general,” Guzmán said, adding that a default would have destabilized the economy and created greater uncertainty.

Guzmán clarified that the government would continue “constructive” talks with the IMF, and that the March deadline with the Paris Club “has nothing to do with the objective of an agreement with the IMF. Our goal is to get a good deal, the sooner the better, but the priority is to get it right.

The 38-year-old minister added that another key part of the Paris Club deal was that Argentina would treat its creditors equally, to allay fears in Japan that Argentina would pay its debts to China but not to the Paris Club.

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