By Agustin Geist and Nicolás Misculin
BUENOS AIRES (Reuters) – Argentina has struck a deal for a $44.5 billion standby agreement with the International Monetary Fund (IMF), the government said on Friday, a major breakthrough in tense and lengthy talks to restructure loans the country cannot repay.
The South American country has been locked in talks for over a year with the IMF over a new program to revamp debt outstanding from a failed $57 billion loan deal from 2018, the fund’s largest ever. It faced a $700 million payment due Friday.
“With this agreement, we can order the present and build a future,” President Alberto Fernandez said in an address to the nation from his residence in the capital Buenos Aires, adding the agreement would not limit Argentina’s economic plans or spending.
“We had an unpayable debt, which left us without a present and a future. Now we have a reasonable agreement that will allow us to grow and meet our obligations through our growth.”
The IMF did not immediately comment on the agreement.
Recent uncertainty over a deal has hammered Argentina’s sovereign bonds, while anti-IMF rhetoric has risen in the grain-producing country, with some protesters on Thursday calling for the government to suspend repayments.
The country’s stock index, bonds and the black market peso all jumped on Friday morning after the news.
Argentina’s Economy Minister Martin Guzman said in a news conference that under the deal the country would target reducing its fiscal deficit to 0.9% by 2024 and gradually end central bank financing to the Treasury.
“We hope to reach our deficit objectives with real spending that does not stop the economic recovery and to be able to gradually strengthen tax collection,” Guzman said.
He ruled out an abrupt exchange rate devaluation, said the country would seek to have positive real interest rates and bring down rampant inflation currently running at above 50% on an annual basis, which hurts savings and salaries.
Argentina and the IMF had been at loggerheads in talks over how quickly Argentina should reduce its fiscal deficit, with the country arguing it needed to be able to maintain spending to preserve the fragile economic growth recovery.
Nikhil Sanghani, Latin America economist at Capital Economics, said that the deal — after months of “hardball” tactics — would bring “some relief to international bondholders in the near term”, though many issues remained.
“This is just the start of a long journey to fix Argentina’s macroeconomic imbalances, and there is still a lot that could go wrong over the coming years,” he said in a note. (Graphic: Argentina’s USD bond prices continue falling, https://graphics.reuters.com/ARGENTINA-ECONOMY/DEBT/zgpomaegjpd/chart.png)
(Reporting by Nicolas Misculin and Adam Jourdan; Additional reporting by Lucila Sigal and Agustin Geist; Editing by Kirsten Donovan and Jonathan Oatis)
