He International Monetary Fund (IMF) is alert to potential market liquidity risks as countries refinance debt issued during the pandemic, its first deputy managing director told Bloomberg News on Wednesday, Gita Gopinath.
“The debt is at extremely high levels”, he claimed. “What also worries me is that we have projected fiscal deficits that are going to be higher than they were before the pandemic.”
“Many countries took on a lot of debt during the pandemic. That was short-term in nature, and it’s maturing, so I think the liquidity risks are something we should pay attention to,” he added.
The impact of the pandemic, which complicated the transportation of goods, especially from China, forcing countries to increase National Production or to seek alternative supplies, and the Russian invasion of Ukraine, which sent energy and raw material prices soaring, have forced governments to increase spending and take on more debt.
What is the debt that Argentina must pay?
Argentina will double the payment of interest to the International Monetary Fund (IMF) compared to what was allocated last year, which means that what was paid in this concept represents 38% of the total amount that the country must pay during this calendar.
Of the US$7,258 million that Argentina must pay to the international organization this year, US$2,798 is interest (38% of that total), which represents the double the payment made in 2023when the amount paid represented 18% of the total paid, according to data from the Finance Secretariat of the Ministry of Economy.
The proportion of money destined to pay interest grows this year due to the reduction in the payment of the general debt.
During the new calendar, Argentina will have maturities of US$4,487 million, which added to the interest completes the more than 7 billion dollars that the Government must transfer to the IMF, whereas last year the country paid US$17,000 million, not counting the extra component of the loan.
Debt with the IMF: how the Fed’s rate hike influences
Another aspect that influences the change in payment proportions is the rise in international interest rates, headed by the US Federal Reserve, which affects the rate applied by the IMF.
Currently, the interest rate charged by the organization led by Kristalina Georgieva is 4%, which makes it the highest in fifteen years.
Taking into account that Argentina not only pays interest, but also has flight attendants due to the delay in paying the loan installments, the total interest rate becomes more expensive.
According to a report prepared by the Congressional Budget Office (CPO), During the past year the interest rate that the country pays to the IMF rose from 7.1% to 8.2%.
Debt with the IMF: how much Argentina will have to pay in the coming years
In the next decade, Argentina will have to pay the international organization some US$16,261 million in interest and US$39,990 million of capital, as can be seen from the economic portfolio schedule in the latest available data corresponding to last September 30.
The growth of the ratio of interest payments means, at the same time, andl increase in the portion of debt that the Government cannot delay until later, since unlike what happens with the payment of capital, the payment of interest cannot be postponed, in accordance with the rules established by the Fund.
This will be a key aspect to take into account for the administration of Javier Milei facing the payment schedule that will have to be faced this year and in the midst of the renegotiation of the agreement to unblock the disbursement of funds, which is gaining ground with the arrival of IMF officials in Argentina.
Source: Ambito
