Chart of the Week: Argentine Anxieties

Everyone knows Argentina has a debt problem. Since independence in 1816 the country has defaulted nine times, the most recent default taking place only last month.

Who does Argentina owe?

The International Monetary Fund (IMF) is the country’s largest creditor, after lending $44 billion in 2018. The country also owes $113 billion to private creditors such as BlackRock, Ashmore and Fidelity.

What happened in 2001?

The most notable sovereign default took place in 2001-02 - the massive spike in the chart - where the country’s debt reached 152% of GDP. There had been optimism about Argentina’s ability to service its debt and the growth potential of the economy, but instead output contracted and tax receipts fell. By late 2001 the country could not bear the burden of its debt and formally defaulted.

Why has it defaulted again?

In 2018 debt reached 86% of GDP and has continued to climb. Upon joining office in January 2020, President Fernández announced Argentina was in a ‘virtual default’ and the country formally defaulted in May. The main driver of this has been a currency devaluation of the peso, impacting the GDP part of debt-to-GDP. The country was in trouble not because of a debt addiction, but because of a series of unfortunate events that meant growth was much lower than even the IMF anticipated.

A nerdier article on the current happenings in Argentina can be found here.