Argentina casts doubts on debt repayment schedule

The administration of Argentine President Mauricio Macri is seeking talks with the IMF to renegotiate the payment timetable of its US$57bn standby agreement with the multilateral.

At a press conference, finance minister Hernán Lacunza (pictured) explained the country's need to bring stability to the markets and allay investors' concerns and uncertainty. Argentina's currency took another hit on Wednesday, when it weakened to 60 pesos per dollar from 58, after the central bank failed to shore it up despite selling US$367mn of its reserves on the FX market.

Lacunza said a potential renegotiation with the IMF would not lower payments or the interest rate, which could be as high as 4.96%. In 2001 Argentina defaulted and started a long cycle of debt renegotiation with bondholders around the world.

The news marks a recognition by Argentine authorities that, after the market crisis of August 12 following the presidential primary results won by Peronist Alberto Fernández, the country faces severe problems to service its foreign debt in time. Lacunza was quick to point out that the inability to pay was due to a short-term "liquidity stress and not to Argentina’s financial capacity."

Private debt

Lacunza announced further measures, including the extension of the expiration date of short-term bonds (known as Letes and Lecaps) by 3-6 months for institutional investors, though not for individuals.

He also said his administration would send a bill to congress to delay payments on local debt, also without a reduction in the principal of the debt or interest rates.

Credit ratings agencies will be looking closely at Argentina’s decision. Shelly Shetty, senior director of sovereigns at Fitch Ratings, recently told BNamericas that the primary's results generated uncertainty in the markets about whether the country will stick with the IMF program.

"What is going to be key for us is what they do with the IMF program, and whether or not they’ll stick with it and to what extend they’ll renegotiate," she told the BNamericas podcast.

Fitch downgraded the country’s rating to 'CCC' from 'B' shortly after Alberto Fernández’s landslide victory in on August 11, in what was seen as a dress rehearsal for the October 27 general elections.