Argentina looks to IMF for more breathing space

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Updated 12 August 2020

Argentina looks to IMF for more breathing space

  • The agreement with creditors gives Argentina much-needed breathing space

NEW YORK: 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 nonpayment 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.

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.”


Bailout will keep Air France-KLM afloat for less than year: CEO

Updated 21 September 2020

Bailout will keep Air France-KLM afloat for less than year: CEO

  • ‘If we base it upon the past few weeks, it is clear that the recovery in traffic will be slower than expected’
  • Governments are coming under pressure to tie airline bailouts to environmental commitments

PARIS: Bailouts provided to Air France-KLM by the French and Dutch governments will keep the airline flying less than a year, its CEO Benjamin Smith said Monday and evoked the possibility of injecting new capital.
In an interview with the French daily l’Opinion, Smith also warned that calls for airlines to contribute more to fight climate change could be catastrophic for their survival which is already under threat due to the coronavirus pandemic.
When countries imposed lockdowns earlier this year to stem the spread of the coronavirus airlines faced steep drops in revenue that have claimed several carriers.
A number of countries stepped in with support, including France which provided $8.2 billion to Air France and the Netherlands which received a $2.9 billion package.
“This support will permit us to hold on less than 12 months,” said Smith.
The reason is that air traffic is picking up very slowly as many northern hemisphere countries are now fearing a second wave of infections.
“If we base it upon the past few weeks, it is clear that the recovery in traffic will be slower than expected,” according to Smith, who said when the bailout was put together the airline was expecting a return to 2019 levels only in 2024.
Smith said discussions were already underway with shareholders on shoring up the airline group, and steps would be taken before the next regular annual meeting in the second quarter of next year.
“One, three or five billion euros? It is too early to put a figure on a possible recapitalization,” he said.
The airline group had $12.12 billion in cash or available under credit lines.
Major shareholders include the French government with a 14.3 percent stake, the Dutch government at 14 percent, as well as Delta and China Eastern airlines which each hold an 8 percent stake.
Governments are coming under pressure to tie airline bailouts to environmental commitments.
One proposal that has come from a citizen’s convention convoked by President Emmanuel Macron would cost airlines an estimated $3.6 billion.
Smith said the imposition of environmental charges on the industry would be “irresponsible and catastrophic” for Air France-KLM.