Thursday, July 4, 2019
Despite exchange rate stabilisation in the last two months, the country risk premium had remained above 800 basis points since early April, reaching a peak of 1,008 on June 3. This reflects investor fears of a new sovereign debt default after 2020, when IMF financing will not be enough to cope with a burdensome debt-service schedule.
- Default fears could prove self-fulfilling if a sell-off of assets drives currency depreciation and a deeper recession.
- The 2020 financial programme is optimistic; if fiscal and debt rollover assumptions are not met, restructuring will become more likely.
- Though Fernandez has promised to honour sovereign debt, an eventual restructuring involving longer maturities seems likely.