Tensions escalate between Argentina and the IMF ahead of crucial loan repayment deadline

9 December 2021

Negotiations between the IMF and Argentina have entered a crucial phase as the Argentine government called for flexibility ahead of a $2.8 billion repayment in March 2022, part of a total of $19 billion it owes to the Fund next year. Former President Mauricio Macri agreed to a $57 billion arrangement with the IMF in 2018, the largest in the Fund’s history (see Observer Autumn 2019).

The negotiation road blocks are surcharges (see Observer Winter 2021), the length of repayment period, and the pace of proposed spending cuts. To placate tensions, Argentina is seeking the IMF’s blessing for a new national economic strategy before it takes the plan to the opposition-held Senate in December. According to government sources, Argentina is hopeful of IMF approval if it presents strategies to improve tax administration and to seek financing from other lenders, such as the World Bank. However, the Fund will likely expect substantial cuts in public spending, which the government opposes.

Adrian Falco and Lionel Stiglitz of Argentina-based organisation Fundación SES, state that, “Argentina cannot pay its debt to the IMF in 2022. In fact, the budget sent to the Senate [in September 2021] lays out that it will not be possible to develop essential public policies if Argentina must spend 4 per cent of GDP on IMF payments.” They added that the IMF “must think about the needs of a country whose macroeconomic crisis they are partially responsible for.” Voices such as the Financial Times have echoed criticisms about the “controversial” IMF loan, noting that “concerns about making such a large loan to a country that had already been bailed out 21 times in six decades by the fund were waved aside.”