Argentina's new USD debt payments after the EFF approval
Following last week´s expected Senate approval, on Friday the board of directors of the IMF approved Argentina´s Extended Fund Facility (EFF) program. This puts a formal end to a nearly two-year debt negotiation, including the first-ever local Congressional debate to endorse such a financing program. While this simultaneously opens a two-and-a-half year time frame of tough quarterly IMF revisions, which will not only be difficult to accomplish but are also likely to keep the political tensions inside the ruling coalition alive, the fact that this government finally managed to negotiate a way out of an otherwise unavoidable arrears with the IMF is still a piece of welcome news. Our report recalculates the USD debt amortizations aligned with the new EFF.
In the very short term, the government's next aim is to close a restructuring deal with the Paris Club and seek additional financing from other international organizations, besides the IMF.
Contrary to what was the case with the IMF, the key aspect of the Paris Club negotiation is not only to postpone the amortization but also to attempt a significant reduction of the high interest rates charged to Argentina, reaching almost 9% (due to its poor track record). Again, these are still much better than hypothetical market rates. But they still represent quite an expensive rate for a multilateral organization.
If the Paris Club debt was resolved in the coming weeks and other IOs were able to raise their exposure to Argentina, not only to roll over their debt, most of the government USD debt requirements would be cleaned up for the next three years.
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