Argentina increases offer to bondholders after IMF claims “room for improvement”

16 July 2020

According to the Financial Times (FT), on 6 July, Argentina announced an improved offer to its bondholders, after IMF staff told the FT in June that, “there is still room for Argentina to increase payments to private creditors,” an assessment confirmed by an IMF technical statement. The assessment, made upon the request of the Argentine authorities, came as the Latin American country entered into sovereign debt default in May, and has been negotiating with private creditors since then. It comes after the IMF warned Argentina’s bondholders to prepare for a haircut in February to help safeguard the sustainability of its largest ever loan programme (see Observer Spring 2020, Autumn 2019).

The IMF specified to the FT that it would be “very hard” to improve the deal beyond a net present recovery value of 50 cents on the dollar. The government’s offer at the time was approximately 46 cents, while offers from private creditors ranged from roughly 53-to-58 cents on the dollar. The new deal offered in July suggests a recovery value of about 53 cents on the dollar, according to the FT.

Responding to the statement, Beverly Keene with Dialogue 2000-Jubilee South Argentina noted, “every penny that goes for the speculators means dollars less for healthcare, food, jobs and decent wages, and more hardship for everyone, children, women, and the elderly in particular. The Argentine Central Bank has shown that none of the debt now being negotiated served the needs and rights of the Argentine people. It is an illegitimate and odious debt. That is why we continue to push for the government to take a sovereign decision to stop all payments and investigate the legality and legitimacy of these claims. There is no other way out of the debt trap.”

As the G20 granted suspensions of official bilateral debt in the face of the Covid-19 pandemic, they called for private creditors to “do the right thing and follow suit.” In May, the International Institute for Finance, the leading global association of private financial institutions, retreated from its initially more promising position on debt relief by endorsing private sector participation on a voluntary basis only. Keene added, “The pandemic makes it clear that we need binding rules that force private capital to respect the sovereign rights of peoples and countries everywhere.”