By Rodrigo Campos
NEW YORK / BUENOS AIRES, Apr 8 (Reuters) – There is still much uncertainty about the path of Argentina’s economic policy to make the country’s debt sustainable, an International Monetary Fund (IMF) official said on Thursday.
“There are always at least two stages to any restructuring. One is how you change the terms of your debt contracts, the other is how you change your policies to make the new debt sustainable. And I think that second stage is where we have a lot of uncertainty. “Alejandro Werner, IMF director for the Western Hemisphere, said at an event organized by S&P Global.
Argentina and the IMF are in negotiations to replace a failed program signed in 2018 by which the South American country owes the body around $ 45 billion.
Initially, the fund and the government hoped to close a deal between April and May, but both have ruled out any reference to that schedule.
The Argentine representative to the IMF, Sergio Chodos, said that the South American country asked the organization to negotiate a program of extended facilities.
“There is a calendar dimension, a technical dimension and a dimension of political definitions. Technically, the first principal maturity of the 2018 loan occurs in September of this year. If we are going to refinance the program, we should have closed a little earlier” explained
“If we are going to partially cancel it in another way and then refinance, it may happen later,” the official added in statements to radio 530.
Investors widely expect no deal to be reached before congressional elections in late October, as Argentina’s dollar-nominated foreign debt is trading at about 30 cents on the dollar.
“Ideally, the total of the credits could be refinanced before, if we close a program before, if you are in the middle of the electoral process, it is not ideal. They are definitions and you are articulating them, those are the deadlines,” he said.
At the end of last month, Economy Minister Martín Guzmán said “important steps” were taken to advance the negotiations days after Vice President Cristina Fernández said the country lacked sufficient cash to return to the fund.
Werner acknowledged that the IMF sees a division within the Argentine government.
“There appear to be significant differences of opinion within the political allies of President (Alberto) Fernández about the direction in which they should go, both in terms of policies and in relation to the negotiations with the IMF,” he said.
Argentina’s economy ministry did not comment on Reuters’ request.
Some private creditors with whom Argentina reached a restructuring agreement last year have complained about the slow progress of the talks, the political debate surrounding the agreement and the lack of a clear economic policy on the part of the government.
“We are working to be ready when the government really wants to make it happen and accelerate it. I think we are in a position to do it, but it is true that it is obvious that the negotiations have taken longer,” Werner said.
“There is an interpretation on our part that perhaps the government feels that it will be much better to undertake this political negotiation after the elections,” he estimated.
Both sides say the negotiations remain “constructive.”
Argentina is facing the second wave of COVID-19 infections, with record cases in recent days, although the government seeks to avoid general lockdowns to protect an incipient economic recovery.
High inflation, which could reach 50% this year according to private estimates, worries since it would affect the growth of the economy.
(Report by Rodrigo Campos with the collaboration of Jorge Iorio and Walter Bianchi; Edited by Eliana Raszewski)