Washington (AP) - The International Monetary Fund (IMF) considers Argentina's debt to be unsustainable and therefore recommends a haircut.
The IMF said it needed a "significant contribution from private creditors" to make Argentina's debt more likely to be sustainable in the long term.
The South American country's debt has now grown to almost 90 percent of economic output in the face of a falling exchange rate and rising interest rates, the IMF said. In order to stabilize the financial situation, the government would have to cut spending so drastically that this would appear "neither economically nor politically", the IMF said. It would not be Argentina’s first haircut. After the worst economic crisis in the South American country in 2001/2002, most private borrowers waived up to 70 percent of their claims in the following years.
The IMF initially did not provide any detailed information on how Argentina should restructure its debt this time, but initially spoke only of a "definitive debt operation". Private creditors should be closely involved in order to achieve the greatest possible participation in the restructuring. IMF chief Kristalina Georgiewa will discuss the situation at the weekend at the G-20 finance ministerial meeting in Saudi Arabia with the Argentine department head Martin Guzmán, it said.
Argentina is in a severe economic crisis, the national currency peso has recently lost significant value. According to the IMF, the government has already introduced controls on capital movements, delayed the repayment of outstanding debts and had the current budget deficit financed by the central bank.
