COVID-19 Pandemic Brings up An Opportunity for Argentina to Reduce its Debt Burden

The global financial crisis brought about by the COVID-19 outbreak seems to have created an ideal moment for Argentina to delay the maturity of some of its loans and ultimately reduce the amount owed to creditors.

The South American country has been insisting these days that it would not be able to pay off its creditors as long as the economy remains in the doldrums.

The current lockdown imposed in response to rapidly-spreading novel coronavirus has created a “legitimate reason” for the country to delay the payments, say analysts.

Even the International Monitory Fund (IMF) is in a mood to grant a moratorium as it is aware that the lockdown will worsen Argentina’s economic crisis. “Argentina continues to live on the edge, only this time the rest of the world is with us,” says the country’s English newspaper Buenos Aires Times.

On Wednesday, the IMF and World Bank jointly urged developed nations to give more time for the poorest countries to repay loans.

“The World Bank Group and the IMF believe it is imperative at this moment to provide a global sense of relief for developing countries as well as a strong signal to financial markets,” the Washington-based lenders said in a joint statement.

Argentina currently owes US$311 billion (more than 90% of its GDP) to various international creditors, with around US$30 billion in repayments due before the end of March.

Earlier this month, the government of Alberto Fernandez recruited HSBC, Lazard, and Bank of America to help with the restructuring. However, the negotiators are yet to reach a deal with the creditors.

Argentina’s economy has been in recession for the past three years after contracting 2% and 2.5% respectively in the last two fiscal years.

Meanwhile, the government has announced a financial package to support the businesses hit hard by the lockdown.

Decades ago, Argentina was one of the wealthiest countries in the region. Thanks to the mismanagement by previous administrations, it defaulted on loan repayments. Five years ago, it was regarded as a pariah in the international financial market.