The government of Argentina has managed to strike a new deal with its major creditors to restructure a portion of its sovereign debt. The deal is expected to provide at least some relief to the country's already struggling economy. The country's already dire economic situation worsened with the spread of the coronavirus pandemic, which brought its finances to the brink of collapse.
Officials announced this week that the country had reached an agreement with a group of private investors, including BlackRock and Fidelity Management, to restructure debts worth around $65 billion. Under the deal, the dates of the debt payments will be moved and some of its terms will be slightly altered in Argentina's favor.
In a statement, the officials stated that the deal should provide the country with significant relief, particularly as it continues to deal with the economic effects brought about by the pandemic. The deal is expected to be completed before August 24, when all of the investors involved formally accept the new terms.
The exact terms of the deal were not made public but sources have claimed that it could have a net-present value of around 55 cents on the dollar. The agreement comes after months of intense negotiations between the government and a group comprised of its largest investors.
For the past couple of decades, Argentina has struggled to keep up with its mounting sovereign debts. As of July, the country has amassed a debt that has reached around $323 billion. The International Monetary Fund (IMF) has described the country's financial situation as "unsustainable" given the ratio of its economic output and its standing debt payments. Argentina currently owes around $44 billion to the IMF.
In May, the country defaulted on a number of its bond payments to investors, the ninth time it has done so since the nation was founded. Economists have warned that the new agreement will likely only be a temporary fix for the country and it will have to find other solutions to properly manage its debt levels for the long term. Argentina's economy is expected to contract by about 10 percent this year, with the pandemic massively worsening its situation. The inflation rate in the country continues to hover at around 45 percent, with its currency having lost more than half of its value over the past couple of year.
Following the announcement of the deal, a number of the country's bonds jumped to their highest levels this year. Argentina's $3 billion bond due on 2048 climbed by about 3 cents on the news, closing at 47 cents on the dollar on Tuesday.
