Debt restructuring debate reawakening old fears

BUENOS AIRES (AP):

Argentina’s Chamber of Deputies yesterday began discussing a bill to restructure the country’s external public debt, which officials say is unpayable amid a deep recession, and has reawakened old fears of financial crises.

With the support of the main opposition parties, the government of President Alberto Fernández appears to have passage of the bill assured. Some leftist groups opposed to it plan demonstrations outside of congress. A vote was expected later yesterday and the bill would then be sent to Senate for passage next week.

The centre-left government’s handling of the bill, in an extraordinary session, highlights the importance it attaches to the South American country’s large debt. It owes the International Monetary Fund (IMF) and private creditors some US$100 billion.

Economy Minister Martín Guzmán has warned that Argentina needs “a sustainable solution” to paying its debt.

“Today the situation is critical, the debt burden cannot be sustained,” he said.

Argentina periodically faces financial crises and liquidity problems that have led it to refinance its debt. At the end of 2001, it declared a record default on just over US$100 billion during the worst economic crisis in its history. It is currently dealing with a contracting economy, high inflation and a weakened currency.

The bill declares the sustainability of external public debt a “priority” and authorises the government to carry out a “restructuring of interest maturity services and capital amortisation of public securities issued under foreign law”. It establishes that the executive will determine the nominal amounts.

The legislative debate takes place as the economy minister begins talks with the IMF to renegotiate the payment of some $44 billion transferred to Argentina under a 2018 credit agreement worth more than $56 billion. The talks will continue in February.