Georgieva to creditors: "Nobody stands to gain from Argentina falling off the cliff"

On Wednesday, Kristalina Georgieva responded to Argentina's creditors: "Nobody benefits from a country falling off the debt cliff," she said in a conference organized by The Washington Post.

"The goal is to restructure the debt in a way that Argentina can pay it off. No one benefits from a country falling off a debt cliff. The country would be excluded from the markets, growth would suffer, people would suffer, and creditors would not get their money back. Sometimes, it is necessary to make a reflexive restructuring", said the head of the IMF in an interview with journalist David Ignatius.

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Defending Argentina's debt position was part of a comprehensive strategy that included suspending debt payments for the world's poorest countries and understanding that the entire planet was in an unprecedented crisis, she explained.

The remarks come a day after creditors questioned the IMF's position in support of Finance Minister Martín Guzmán's second proposal.

The position of the creditors' funds is that it is enough for Argentina to make an additional effort of 0.2% of its GDP at the beginning with measures that boost economic growth to reach a floor of 50 cents per dollar of issued debt that they postulate. And that in this way the debt sustainability criteria are respected, despite the "limited margin" that the IMF said was left so that Guzmán would continue to approach what they are asking for.

On the contrary, the IMF interpretation suggests that creditors are the ones who should make the effort to close the gap, as they have already reduced their initial claims by more than 15 cents on the dollar during the negotiation period that began after the default.

The dispute between the IMF and the creditors was not confrontational, but it did have some fundamental implications. With $44 billion due from Argentina, every penny the country does not spend on private bondholders will facilitate the cancellation of the Stand By that Macri asked Lagarde for in 2018.

Although not in the short term. Guzmán is also going to restructure the debt with the Fund. The difference with the bondholders is that the IMF does not allow withdrawals and, as a last resort lender, has a preferential position for collecting, so the debts with it cannot be defaulted. Therefore, the restructuring will be a re-profiling in time of the payments to move them away from the current critical situation. The Paris Club and other multilateral credit institutions will follow suit.

Regarding the proposal endorsed by the IMF on Monday, yesterday Ad Hoc Creditors group explained that "the difference between the government's most recent proposal and that of our group with Exchange Bondholders Group is approximately 1.5% of GDP distributed over the next decade until 2030, and another 1% of GDP from 2031 to 2040" noting that what they are asking for is consistent with a sustainability perspective.