After reaching a $65 billion restructuring agreement in principle with its creditors earlier this month, Argentina must now turn to relief from the International Monetary Fund to free up cash in the near term, the IIF said on Tuesday.
“We think external financing will be comfortable if the IMF rolls over its exposure,” the Institute of International Finance said in a note.
The agreement with creditors gives Argentina much-needed breathing space.
Cash flows into and out of the country have ground to a halt, partly due to capital controls and the non-payment of obligations during the debt negotiations.
“As long as capital controls remain in place, resident capital flight will not be a source of pressure,” said the IIF note.
Payments to the IMF could quickly become unsustainable under the current schedule.
The large payments due to the IMF stem from having received the largest-ever program from the Fund in 2018.
Beyond that new agreement expected with the IMF, investors are focused on Argentina’s medium-term economic plan, according to Sergi Lanau, deputy chief economist at the IIF.
Prudent fiscal policy has been hard to come by for Argentina, Lanau said, adding that the government has done “a lot” on the tax side and now it is “more likely that it’s unavoidable to look for savings on the spending side.
“That’s always politically and socially complicated, but it needs to be done.”