With US$730 million due to the International Monetary Fund this Friday, Argentina starts a schedule of payments totalling US$19 billion for 2022, an unaffordable figure for the country seeking refinancing of a US$44 billion-loan.
With a long history of loan defaults, Argentina insists it wants to honour its commitments this time but without sacrificing economic growth.
"Our fight with the IMF is to firmly say that we want to have the right to grow as we believe we should," President Alberto Fernández said this week.
In 2018, under the government of then-president Mauricio Macri, the IMF granted Argentina its biggest-ever loan of US$57 billion, of which the country received $44 billion.
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Fernández, who succeeded the Cambiemos leader in office in 2019, refused to accept the rest of the loan, and is now seeking to renegotiate repayment terms.
Less than 24 hours before the first deadline for 2022, it was unclear what the country would do.
"Payment depends on how the negotiations progress," Government Spokeswoman Gabriela Cerruti said Thursday, insisting "we will not reach any agreement that compromises the path to [economic] growth."
Argentina, which has been in recession since 2018, in 2020 restructured US$66 billion in foreign debt.
Can Argentina pay its IMF debt?
With almost no access to international credit markets, Argentina has less than US$39 billion in reserves. Analysts estimate liquid reserves are less than US$4 billion. Some say zero.
"The problem is not the debt stock to GDP, the problem is the maturity structure, the fact that there is a very large debt with the IMF that expires in the short term," said Economy Minister Martín Guzmán in a recent interview.
Argentina's debt to multilateral and bilateral agencies represents 17 percent of GDP, according to the Economy Ministry.
But in 2022, it must pay the IMF US$19 billion, in 2023 another US$20 billion and in 2024, US$4 billion.
A US$2-billion maturity to the Paris Club of creditor countries is also due in March.
"There is no such money, there are no such resources in Argentina," an official at the Foreign Ministry recently told journalists in Washington.
What happens if Argentina does not pay?
"If [Argentina] doesn't pay for a day or two, I don't think too much will happen. Surely the IMF can arrange for there to be an extension," Gabriel Torres, a senior analyst for the Moody's risk rating agency, told AFP.
If the money remains due because Argentina refuses to pay or rejects the conditions, the IMF could expel the country, "although that is very rare and no-one thinks it will happen," said Torres.
If Argentina stops paying, other multilateral agencies such as the Inter-American Development Bank (IDB) or the World Bank could hold back loans.
But the biggest risk is of private sector loans to finance exports "stopping at a stroke because everyone is afraid of dealing with a country that doesn't pay the IMF," said Torres.
Rising inflation, already at 50 percent, is another risk if Argentina resorts to buying dollars as a buffer and a currency shock occurs, he added.
Is the IMF likely to yield?
"We understand that the social and economic situation is challenging, which is why we are adopting a flexible and pragmatic approach and... we hope we will make even more progress in the next days," IMF deputy managing director Gita Gopinath said this week.
Torres believes the IMF would want an agreement, though there are limits in terms of fiscal deficit, money issuance and inflation.
"Our expectation is that the government will end up reaching an agreement, even if it resists. I would also say that this agreement will be difficult to fulfill," said the analyst.
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by Nina Negrón, AFP