Argentina and creditors break deadlock on $65bn debt mountain
ARGENTINA has finally broken the deadlock in talks with international creditors and struck a deal to restructure its huge $65bn (£50bn) pile of sovereign debt.
The country’s bonds rallied after Argentina claimed the agreement with three creditor groups would provide “significant debt relief ”, following months of negotiations. However, analysts warned the deal was just a sticking plaster for the country’s perennial debt woes as talks continued with the International Monetary Fund.
The South American country suffered a ninth default in May, and needed to restructure its debt even before Covid-19 dealt its economy another blow. The country was already struggling with a deep recession, surging inflation and a collapse in the peso.
Argentina will now have several years’ breathing space before debts mature, and has also cut the interest rates it pays. But analysts warned the deal represented only a small haircut of 3pc on most of the bonds. The government said the revised agreement included new payment dates that improved the offer to creditors, which include BlackRock, Ashmore and Fidelity, but did not increase the amount owed. It means the country will avoid being locked out of global markets.
But economists questioned whether it would be enough to stabilise Argentina’s dire public finances, given another $44bn must be repaid to the IMF over the next four years. Nikhil Sanghani, at Capital Economics, said: “It is a positive in that it avoids this massive legal scrap that was a worry at one stage… but we don’t think this will be sustainable in the medium to long term.
“We suspect that the IMF will provide additional funding to Argentina in a repackaged agreement which also extends the current debt repayment schedule.”
Despite suffering a less serious virus outbreak than neighbouring Brazil, Argentina is still expected to lurch into a deep contraction this year.
Sebastian Rondeau, Bank of America economist, said lockdown had hit the Argentine economy hard and warned of a 14pc plunge in GDP in 2020.