Argentina: Government Reveals Installment Plan to Pay $2 Billion Debt to Paris Club

Argentina's Economy Minister Sergio Massa on Friday said the government had "successfully" reached a deal with the creditor group Paris Club to restructure its $2 billion debt.

According to Bloomberg, Massa told business leaders in a televised that the agreement will allow Argentine companies to access credit from European institutions.

"Today, we have successfully closed the agreement with the Paris Club to return our country's relations with the European bloc to normal," the minister said at the event in Escobar, Buenos Aires, to promote local loans for firms that produce capital goods.

"We have to be credible but firm in defending Argentina's interests," Massa added.

Details of Argentina's Debt

According to a document shared with Reuters by officials, the deal between Argentina and Paris Club, a group of 22 nations that lend to governments in need, would bring the current 9% interest rate on the debt down to a weighted average of 4.5%.

Payments for the 13 semi-annual installments would start in December, with Argentina paying a step-up interest rate beginning at 3.9% for the first three payments to an average of 4.5% until September 2028.

The document noted that Argentina would pay around 40% over the next two years, which was "sustainable and did not compromise the process of strengthening international reserves."

Under the new terms, Argentina will reportedly have to make average payments of $170 million, including capital and interest.

Argentina's negotiations with the Paris Club have dragged on for years, while the country also engaged in parallel talks with the International Monetary Fund (IMF) for a new financing program.

Argentina has restructured more than $100 billion in debts with private creditors and the IMF over the past two years. However, the country has remained in a risky situation due to the government's scarce foreign reserves.

Argentina's restructured dollar bonds increased after its deal with Paris Club, with the 2029 up 2.4 cents to 22 cents on the dollar and the 2046 rising from 2.1 cents to 21 cents. On the other hand, euro-denominated bonds only had a few changes that day.

Earlier this week, Fitch, an international credit rating agency, downgraded Argentina's sovereign debt rating due to rising risks over the country's ability to meet future debt repayments.

Paris Club Gives Argentina More Time to Settle Its Debt

Last year, Argentina received additional time to pay back its loan from the Paris Club while it carried out a successful negotiation with the IMF over a new $44 billion program.

According to a statement from the Paris Club, the two parties revised the loan agreement to clear remaining payments over a period of six years, US News reported.

"The amendment consists of a rescheduling of 100% of the total amounts of principal and interest due and not paid as of 30 May 2022 inclusive and a reduction of the interest applicable after 30 May 2022," the statement said.

The Paris Club is an informal club of creditor countries formed to assist debtor countries in resolving payment issues, according to Investopedia.

The Paris Club currently has 22 permanent members, including the U.S., the United Kingdom, Japan, and most Western European and Scandinavian countries.

It has no official regulations or a set founding date as an informal body, but its first meeting with a debtor country, Argentina, was in 1956.

This article is owned by Latin Post.

Written by: Bert Hoover

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