Restructuring Argentina’s Debt Will Require IMF Support

The IMF is like a hospital emergency room. Countries abhor the fund’s demands to adjust their economic policies in return for loans, so they only walk in when an accident makes them lose access to private capital, the Financial Times reported. The IMF imposes conditionality because its interest rates are fixed and cannot reflect the borrower’s risk — it is lending the taxpayers’ money of member countries. The “injured” country is requested to reduce spending and raise taxes. When fiscal changes cannot re-establish debt sustainability, it is also asked to restructure its debt. Unfortunately, Argentina escaped this rule. An early reprofiling of Argentina’s public debt would have spared the fund an embarrassing situation. Argentina met all the fiscal and financial conditionality. Read more