IMF staff: Argentina’s debt restructuring plan could restore sustainability

The Argentinian government’s plan to restructure its debts could put the country back on a path to debt sustainability, but there are major risks to the outlook, International Monetary Fund staff say.

The government invited the IMF to assess its May 26 restructuring proposal, which would see investors take haircuts of up to 12% on their bond holdings.

In a technical note, IMF staff say the plan would restore debt sustainability “with a high probability” under the macroeconomic scenario developed by fund staff in March and the Argentinian government’s assumptions on its ability to finance itself.

However, if instead the calculation is made using the March macroeconomic scenario and March financing assumptions prepared by the fund, the debt would probably not be sustainable, IMF staff say.

In addition to this sensitivity to the underlying assumptions, IMF staff note the plan relies on the country avoiding the materialisation of “significant downside risks to Argentina’s economic outlook, fiscal position and – potentially – debt-carrying capacity”.