IMF Warns US About Setting Sovereign Debt Precedent

The International Monetary Fund (IMF) has warned that Argentina’s legal defeat in its fight against hedge fund investors may have wider implications.

On Monday, a US Supreme Court ruling sided with bondholders demanding Argentina pay them $1.3bn (£766m).

The IMF said it was concerned about “broader systemic implications”.

Meanwhile the ratings agency S&P cut Argentina’s credit rating, warning the ruling made it more likely that the country would default.

“The Argentine government has limited capacity to pay the plaintiff creditors while servicing its current debt”, S&P said.

S&P reduced the credit rating by two notches from “CCC+” to “CCC-“.

The move theoretically makes it more expensive for Argentina to borrow money. However, the country has been unable to raise funds on the international market since its 2001-02 debt default.

Argentina’s Economy Minister, Axel Kicillof, said the government was “starting to take steps” to restructure the debt under Argentine law – as a way of avoiding complying with the US order.

In a press conference Mr Kicillof said this would allow the country to honour its commitments with those creditors who had accepted the initial agreement.

via BBC

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