Rethinking Argentina’s Debt

A big question facing Alberto Fernández, Argentina’s new president, is what to do with the country’s debt, the Financial Times reported. Gross government debt is equal to 93 per cent of GDP, its highest level since the 2004 restructuring, while the price of most Argentine sovereign bonds has fallen to less than 50 cents on the dollar. To some, these numbers suggest an over-indebted economy requiring an aggressive debt restructuring imposing significant haircuts on creditors to restore debt sustainability and economic growth. But is this the correct way to look at it? I think not. There is enormous uncertainty over Argentina’s capacity to service its debt, nowhere better captured than in the evolution of the debt forecasts published by the IMF in its debt sustainability analyses. These have consistently failed to anticipate the scale and pace at which Argentina’s debts would continue to accumulate. Read more