Good summary of the choices incoming President Fernández and the IMF face from the WSJ
wsj.com/articles/a-fin…
wsj.com/articles/a-fin…
One point of contention is likely to be the fiscal path in any new program ...
With output falling, the current targets are unrealistic.
"Moody’s Investors Service predicted the economy will contract 3.9% this year and 2.5% in 2020. GDP shrank 1.7% in 2018"
2/x
With output falling, the current targets are unrealistic.
"Moody’s Investors Service predicted the economy will contract 3.9% this year and 2.5% in 2020. GDP shrank 1.7% in 2018"
2/x
IMF will at a minimum want a credible path to primary surplus though ...
(a very reasonable demand, if there is flexibility on the path)
3/x
(a very reasonable demand, if there is flexibility on the path)
3/x
And Fernandez will have to outline what kind of debt restructuring he is seeking --
"Uruguay" (short-extension of maturities, no change in coupon"
"Uruguay plus" (longer extension of maturities and a reduction in coupon)
"A haircut to face and coupon"
4/x
"Uruguay" (short-extension of maturities, no change in coupon"
"Uruguay plus" (longer extension of maturities and a reduction in coupon)
"A haircut to face and coupon"
4/x
I read the "Uruguay plus coupon reduction" statement as a sign that the Argentines are going to look for some real debt service saving in the restructuring - the line between preserving face and cutting coupon and cutting face and keeping the coupon is ultimately blurry
The way I see it is simple: a generous restructuring of the bonds and a slow adjustment path on fiscal doesn't add up -- it implies ongoing fiscal deficits that Argentina cannot finance in the market. Argentina still needs the IMF (or another third party) for funding.
