IMF: Argentinian Debt 'Unsustainable', Economic Crisis Deepens

The International Monetary Fund admitted Wednesday that Argentina’s debt is “unsustainable” and affirmed that bondholders in negotiations with the South American country would need to make a meaningful contribution to help resolve the crisis.

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The statement came as the fund wrapped up a week-long visit to Argentina, which is battling to avoid defaulting on around US$100 billion in loans and bonds while still not having recovered from the neoliberal economic policies implemented by the last government, involving high inflation and unemployement.

Argentina's Economy Minister recently said austerity policies backed by the IMF were to blame for Argentina’s debt crisis and warned upcoming debt talks would likely be frustrating for bondholders.

The IMF said a drop in the peso currency and sharp rise in public debts mean the country needs a “definitive debt operation - yielding a meaningful contribution from private creditors” to restore debt sustainability.

The statement lends support to Argentina’s new center-left government which has stated it cannot pay its debts unless given time to revive growth. Argentina is looking to wrap up debt negotiations with creditors by the end of March.

The fund added that Argentina’s ability to service its debts had deteriorated sharply compared to mid-2019 when it categorized the country’s situation as “sustainable, but not with high probability.”

“IMF staff now assesses Argentina’s debt to be unsustainable,” it said, adding that the fiscal surplus Argentina would need to reduce its debts was “not economically nor politically feasible.”

The IMF said meetings with Argentinian officials had been “very productive” and that Managing Director Kristalina Georgieva would meet Guzman at the G20 Finance Ministers summit to discuss “next steps.”

Argentinian bond prices have dropped 3.5 percent this year as uncertainty rose about the country’s ability to pay US$44 billion to the IMF, its biggest single creditor. The country’s over-the-counter bonds edged up on Wednesday.