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The IMF supports a new offer of Argentine debt but recognizes that there is some space to improve it

2020-06-02T15:41:55.765Z


According to the assumptions presented by Martín Guzmán, something else could be offered and still meet with the debt being highly probable.


Mary Church

06/01/2020 - 13:02

  • Clarín.com
  • Economy
  • Economy

E l International Monetary Fund (IMF) today released a technical note, at the request of the Argentine government, which supports the new proposal submitted to private creditors and was released last Thursday, leading the bid to $ 47.

This arises from a statement released from Washington, which details that under the macroeconomic and financing assumptions made by Martín Guzmán's team, there would be some space to improve the offer and still meet sustainability assumptions.

However, according to these macro and financing assumptions, the calculation that arises is that the offer should not exceed a net present value (NPV) of $ 50 (assuming a discount rate of 10%) to be consistent with the thresholds. debt service and make it "sustainable with high probability", as it arises from a source with direct knowledge of the IMF's position.

Today's Fund statement states that “the staff considers that the authorities' revised debt restructuring proposal of May 26 would be consistent with the restoration of debt sustainability with high probability under the macroeconomic assumptions of the technical note. March and the authorities' financing assumptions contained in their revised proposal. ”

And adds that “however, the analysis also suggests that there is only a limited margin to increase payments to private creditors and at the same time meet the debt and debt service thresholds and other conditions established in the March technical note. "

The IMF made the caveat of explaining that macro conditions are shared with those of the Argentine government, of a drop in GDP of 6.5% for this year and a primary fiscal deficit (before the payment of interest on the debt) of 3, 1% of GDP.

However, it made a difference in the financial assumptions. “The authorities assume that the financial gap that arises from the official debt service that matures during 2021-24 would be refinanced at a weighted average interest rate of 3.5 percent and a weighted average term of 8.8 years. Under the most generous financial scenario in the technical note (Scenario 3), it was assumed that this gap would be refinanced at an average interest rate of 5 percent and with an average term of 7 years, ”he delimited.

In fact, given the conditions that mark the "most generous scenario", but even more negative than that of Argentina, there would be no place to make an improvement in the offer to private creditors.

In the event that the Argentine assumptions occur, the IMF added that “the debt / GDP ratio would remain stable beyond 2030; gross financing needs and debt service in foreign currency would remain manageable after 2030; and debt service to private creditors in 2020-24 would be low enough to mitigate short-term refinancing risks. ”

They also warn that these results could occur as long as certain risks do not materialize. "The macroeconomic assumptions contained in the March technical note remain subject to exceptional uncertainties, particularly with respect to the impact of the Covid-19 pandemic, which involves considerable downside risks to the economic outlook, the fiscal position and, potentially, the carrying capacity of Argentina's debt ”.

Another point that is important is that this is the technical position of the IMF, after the request for assistance in debt matters that the Argentine government requested and does not imply a position of the body itself in relation to the negotiations.

The IMF granted Argentina a loan for $ 57 billion in 2018, the largest disbursed in the agency's history. Of that total, the country received in 13 months money orders of US $ 44,000 million, which added to the interests, implies having to return some US $ 49,000 million until 2024.

The government plans to renegotiate those payments through a new loan from the agency. Martín Guzmán said that once the debt renegotiation with private creditors is completed, the IMF will move forward.

To reach that point of renegotiating a new loan, Argentina must first go through the review of its economy , which is known as Article IV within the IMF. In this sense, a technical mission is generally sent to the country, but if the coronavirus pandemic continues, it could be done virtually.

Source: clarin

All business articles on 2020-06-02

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