During the G20 finance ministers' summit in Saudi Arabia next week, Argentine finance minister Martín Guzmán and Kristalina Georgieva, head of the IMF, will meet to, in the organization's words, "define the next steps in the relationship between the IMF and the Argentine Republic". For this reason, the market expects that they will soon reach an agreement and that it will probably be in the style of an Extended Fund Facility (EEF).

The market's perception is that today's message is not only the recognition that the Stand By agreement signed by Lagarde with the previous government failed, but that it is the prelude to a new agreement with some period of grace for the repayment of the loan and a macroeconomic program aimed at the recovery of the exportable and payment capacity.

This afternoon the Fund supported Guzmán's position that the debt is not sustainable, that further fiscal adjustment is not feasible, and that to get out of the financial crisis "an important contribution from private creditors" is needed, a contribution achieved in a "collaborative process."

For the time being, analysts understand that President Alberto Fernández has already done everything and more than the IMF can ask: he has deactivated the retirement adjustment clause that " burdened" the fiscal accounts, he has taken out the double indemnity for the state, he has frozen the income of the state, he has taken state expenditure to nearly zero to the point where it is estimated that in the first two months the budget execution will end up at around 15% and he has made progress against privileged retirements. In other words, he cleaned up the short-term public accounts that his predecessor Mauricio Macri could not do. "It exceeded Georgieva's expectations," they summed up to LPO.

In this sense, it is key that Labor Minister Claudio Moroni has said that sooner or later Argentina will have to discuss the retirement age, nothing more or less than the medium-term reform that the IMF may request as part of the macroeconomic program for the repayment of the $45 billion it disbursed in the second half of Macri's term.

Under the umbrella of an Extended Fund Facility (EFF), Georgieva would be able to provide Alberto Fernandez with the terms that the president wants and, in return, she would get a macroeconomic program that distances her from the failure of Lagarde's program and shows a longer-term path to recovery.

With 87 percent of debt relative to GDP, by Fund standards, Argentina would not be far from returning to the voluntary debt markets. That is why the bondholders are called upon to accept an " important" debt relief and enter into a voluntary debt swap. Greece gained market access to this ratio around 165%. Ukraine regained market access with an EEF and a restructuring of its debt which left it at 72% in 2017.

"Compared to assistance provided under a Stand-By Arrangement, assistance under an Extended Arrangement is characterized by participation in a longer-term program - to help countries implement medium-term structural reforms - and a longer repayment period," the IMF explains on its website.

Kristalina Georgieva, head of the IMF

"The EFF was created to help countries facing (i) serious balance of payments problems due to structural deficiencies, or (ii) an economy characterized by slow growth and a very weak balance of payments situation," the text adds. Precisely what Guzmán is asking the IMF to do, which it did not do with the Stand-By, is to ensure that the loan would generate the structural means to repay the debt.

"I think it would be good news to clear up the issue of the debt with the Fund, although we will have to see what it entails. Today the great urgency and where the times are running out because of the scarcity of net reserves to face the payments is the negotiation with the private bondholders. Until this is completed, it will be difficult for the country risk to decrease, the demand for money to recover and the economy to gain margin for growth," Martin Vauthier, an economist and director of EcoGo, told LPO.

"Today short-term macroeconomy is defined by the negotiation with the private sector. In this sense, the IMF said today that the bondholders should accept a significant reduction, but it seems to me that, in line with what it has been saying in its previous communications, the Fund would not be promoting an aggressive reduction in the present value that would make it difficult for the bondholders to accept the restructuring. The sustainability of the debt depends on the availability of valid access to the Fund's resources", the specialist said.