BUENOS AIRES (Reuters) - Argentina needs substantial relief from private creditors in its debt restructuring and there is “virtually no scope” for its servicing bond payments in the medium term, the International Monetary Fund said in a staff report on Friday.
Argentina’s public debt, pegged at close to 90% of gross domestic product at the end of 2019, is untenable, the IMF added, signaling support for the Latin American country’s government, which says it cannot pay its debts without being given time to revive growth.
The IMF staff envisaged that Argentina would need to bolster spending to ride out the impact of the coronavirus pandemic, and would then reach a primary fiscal surplus of 0.8% of GDP by 2023, rising to about 1.3% over the longer-term, the report said.
Argentina plunged into economic crisis in 2018 and was forced to turn to the IMF for a $57 billion credit facility. The crisis worsened last year with recession, stubborn inflation and a tumbling peso.
The major grains producer is in talks with creditors, including the IMF, to renegotiate about $110 billion in foreign-law bonds and lines of credit.
The IMF report said there were various restructuring scenarios, including “face value haircuts, maturity extensions, grace periods, and interest rate cuts,” which could deliver the necessary cash-flow debt relief.
It said Argentina needed FX cash-flow debt relief ranging from $55 billion to $85 billion over the next decade.
“A substantial debt relief from Argentina’s private creditors will be needed to restore debt sustainability with high probability,” IMF head Kristalina Georgieva said.
A key near-term risk is related to stronger negative impact of the current global coronavirus pandemic, which could hit Argentina more than currently assumed, the IMF report added.
Reporting by Eliana Raszewski; Writing by Cassandra Garrison and Adam Jourdan; Editing by Leslie Adler