MercoPress. South Atlantic News Agency

Black Thursday for Argentina's economy – no agreement with IMF

With Thursday's losses, Argentine bonds accumulate decreases of up to 7.5% in the last five days

Argentine President Alberto Fernández and Economy Minister Martín Guzmán agreed not to give in to additional demands from the International Monetary Fund (IMF) regarding the US $ 44 billion loan from the previous national administration.

Following Guzmán's announcements, Argentine bonds dropped 2% on average, due to which traders spoke of a “Black Thursday.”

The lack of understanding with the IMF also pushed Argentina's country risk up to 1,828 points, thus nearing once again its recent peak of 1,900.

Statements from Guzmán, Fernández and presidential spokeswoman Gabriela Cerruti were not welcome among investors. The disagreements are focused on fiscal adjustments the multinational body would like to see enacted in Argentina.

With Thursday's losses, bonds accumulate decreases of up to 7.5% in the last five days.

Country risk went up more than 4% and 69% since the September 2020 debt swap when US $ 65,000 million were restructured.

Regarding negotiations with the IMF, Guzmán pointed out disbursements to cover current maturities have been contemplated, which suggests there will be no new financing. The minister also explained his main macroeconomic guidelines for the near future, which were shared with IMF officials and feature a gradual fiscal consolidation, positive real interest rates, gradual reduction in monetary financing, real exchange rate consistent with trade surplus, accumulation of reserves, continuity of capital controls, and price and income policies.

Guzmán also claimed the IMF's proposal “would halt the economic recovery.” He also explained reserves are expected to grow from US $ 3 billion to US $ 4 billion per year, while monetary financing for 2022 has been capped at 2% of GDP and should gradually fall in the following years.

President Fernández warned that “to adjust the economy is to stop growing” and for that reason “the word adjustment is banished in the discussion.” He insisted he was confident Argentina “is going to achieve a convenient restructuring” of the debt with the IMF and recalled that paying back the loan granted to the government of former President Mauricio Macri will go beyond his own term and that of whomever is elected president in 2027, which will generate further problems “in the years to come.”

Cerruti, also pointed out the low probability that the government will make the adjustment requested by the Fund. “Argentina knows that it is not going to make any type of adjustment, because when Macri adjusted it did not help the country grow or even to pay the debt to the Fund.”

With payments worth US $ 2,879 million due in March and the level of reserves in critical condition. Guzmán does not have much time to seek a more reasonable agreement.