The Argentine Government requests deferral of payment from creditors
Argentina is going through a difficult time. The pandemic has had a serious impact on its economy, and is threatening the default that the country experienced in 2002. The Argentine government is doing everything possible to minimize the damage, but without financial support from other nations it may not be able to cope.
Argentina was unable to pay the interest on the loan, and its debt was $500 million. The authorities are developing measures to prevent a default on the bonds. For this purpose, they have asked for a grace period, which carries over the payment period by 30 days. This time will allow the government to enter into agreements with creditors on restructuring.
Buenos Aires is doing its best to avoid the situation that happened in 2002. At that time, the authorities had also been unable to repay their credit obligations on time, which had led to long court proceedings that had caused the country to experience an economic crisis. The procedure of confrontation with creditors had lasted for years, and during that time a huge number of people in Argentina had lost their jobs, savings and become poor.
The state’s total debt is $65 billion, and during the grace period the government needs to figure out where to get the money to pay interest on this amount. It is worth noting that the creditors have not been too happy with the request from Buenos Aires, and it is not a fact that they will make concessions.
In order to restructure its debt, the Argentinean government offered bonds to creditors, including the United States. The latter have certain features. For example, the authorities can change the terms of debt repayment without notifying the holders. This option of restructuring does not suit the creditors, so negotiations are very slow and difficult. However, the Argentine Minister of Economy said that the proposal was not yet subject to review.
In the course of 60 years, the country has applied to the IMF 30 times for financial assistance. In most cases, the funds were provided on rather strict conditions associated with the restriction of the state budget. Therefore, many Argentinian citizens are hostile to the International Monetary Fund, as they believe that this organization has had a hand in the difficult economic situation in the country.
The last analysis of the debt burden in Argentina was carried out in July last year. During this time, the national currency fell by 40%, while cash reserves decreased by almost $20 billion. By early 2020, national debt amounted to almost 90% of GDP, which is 13% more than the IMF forecast. According to experts, the situation was complicated by measures from the authorities, who tried to control the currency rate, but failed to cope with the task.