Thursday, March 28, 2024

Argentina .. Is this where Zambia is headed?

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Argentina says wants debt deal as fiscal deficit balloons

Argentina’s new finance minister said it was imperative to resolve the country’s legal dispute with U.S. creditors over unpaid debt because financing of the country’s fiscal deficit this year may depend on progress on the issue.

Solving the more than decade-long debt battle would enable Argentina to return to global credit markets and stop financing the deficit with the printing presses, a tactic which helped fuel double digit inflation under the previous government.

Finance Minister Alfonso Prat-Gay said the negotiations would be tough but it was in the country’s interests to reach a deal.

The previous government’s failure to do so had cost the economy, he said, with creditor claims in New York having risen to $9.9 billion from $2.943 billion originally.

“We’re not going to ignore the issue. It’s not our mess but we have no problem in cleaning it up,” Prat-Gay told a news conference.

Former President Cristina Fernandez had refused to settle with the funds that bought Argentine bonds on the cheap after its massive 2002 default and then held out for better terms when Argentina restructured its debt.

They are broadly known in Argentina as “vultures” for picking on the carcass of the economy after the default plunged millions of Argentines into poverty.

Finance Secretary Luis Caputo met with for the first time with the funds on Wednesday in the New York office of the U.S. court-appointed mediator Daniel Pollack for preliminary talks.

In addition to the debt battle, Argentina’s new center-right government, which took office in December, also inherited a primary fiscal deficit of 5.8 percent of GDP in 2015, Prat-Gay said.

“The primary fiscal deficit is at its highest in 30 years,” he said.

Fernandez’s two terms were characterized by heavy government spending that aimed to boost the domestic economy.

The new government aims to reduce this deficit to 4.8 percent of GDP this year and 3.3 percent in 2017, in part by eliminating subsidies for public services for the 30-40 percent of wealthiest Argentines, Prat-Gay said.

Subsidies would be maintained for those who needed them, he added.

Inflation has already eased back to levels seen before Argentina’s 26.5 percent devaluation in December, Prat-Gay said.

The new government aims to bring it down to between 20 and 25 percent this year from 28 percent in 2015.

By the end of Macri’s term, in 2019, inflation should be around 5.0 percent, the minister said.

Source :CNBC news

Argentina history

1983

Human rights abuses, a floundering economy and the disastrous Falklands War left military leaders disgraced by the 1983 election. Spending increased under the next president, Raúl Alfonsín, but government revenue all but disappeared. Only 30,000 citizens paid income tax in 1989 and inflation increased to over 5,000 percent. Power passed to Carlos Menem, who slashed import tariffs and privatised industry, while widespread corruption scared off many investors.

Nov 2001
The government stopped payment on more than $100bn in debt, the world’s largest sovereign debt-default. In the space of two weeks, five different presidents held office. Unemployment soared above 20 percent, with people leaving the country in droves, as Argentina entered a deep recession. The national economy shrunk by a fifth. As part of a debt-restructuring plan, the majority of creditors accepted new bonds that were worth roughly 35 cents to the dollar.

2003 – 2014
Néstor Kirchner was elected in 2003 and brought with him a return to populist politics. His leftist policy focus on social welfare and economic intervention initially steered the economy out of trouble. He was succeeded by his wife, Cristina Fernández de Kirchner, in 2007, who continued what would become known as Kirchnerism. The economy slumped in 2010 following Néstor’s death. With inflation steadily increasing again, Argentina defaulted on its national debt in 2014.

By Patriotic Zambian

25 COMMENTS

  1. You would wish that the destination would be Argentina. There is a chance that we could return from there. No, we are going down the Musi-O-Tunya with no hope of return!

    • I would trust a whiteman to run anything and not fail.

      Zambia should have had a white presdeint and there would ne debt.

      Either Scott or Sampa (because he is white inside) should be the Presdeint.
      They are allergic to corruption.

      Thanks

      BB2014

  2. Obviously Sata and now Lungu have never heard about this! If they had they would have been much more careful before throwing Zambia into the same hole!

    • That’s not true. President Lungu held back on Austerity on citizens behest. We can start reducing the deficit but the solution at time of poor rains, harvest and groaning electricity projects coming to fruition, would be too much a burden on Zambia just right now.

  3. This is the sort of thinking we Zambians need to pre-occupy ourselves with. What will happen to us in the next 15 t 20 to 40 years.
    We need Government to give us a plan for debt repayment else there is no reason why we would not find ourselves in the same ditch as Argentina is today.

    But do we expect a person who failed grade 12 or did not reach grade 12 at all to think in the long term?. This is why Grade 12 qualification is absolutely necessary.

    • Spot on Tutu. The unfortunate thing is that Zambian is one country where people don`t think about the future of their children. All they think about is tribe.

  4. When the loan matures and we start paying back the loans with interest, that will be the likely turn we shall take as a country. For the time being, we shall be ok until loans servicing starts. And PF wont be in power to tell us that its GLOBAL

  5. MUSHOTA YOU ARE WORSE THAN A DOG. YOUR INFERIOLITY COMPLEX WILL BURRY YOU. WHO DO YOU THINK A WHITE MAN IS? ZAMBIA TO BE RULED BY GUY SCOTT OR SAMPA? ZAMBIA IS OK WITH EDGAR AND HE WILL RULE UNTIL 2021. SO YOU MUSHOTA AND YOUR MINIONS CAN CAN HANG!!!!!!!

    • @oobby, if you did not know if Lungu and Scott were different but only looked at their records as President who would have done a better job – in three months!?????

      Scott, that stopped people using Government resources (our taxpayers money!) for party campaigning, or Lungu that hired a 300,000 Dollar airplane to go and have a drinking party in New York?

      Don’t worry about giving us an answer – WE KNOW THE ANSWER ALREADY!!!!!!!!!

    • @Patriot Abroad. No one born before 24 October 1964 was Zambian before that date. So even you are not proper Zambian. Your parents or grandparents were born in Northern Rhodesia. Scott is as Zambian as you are. Just saying, so you know.

  6. Which country is not borrowing? We can blame PF if they found money worst it and start borrowing but PF never found even a one Ngwe. Where were you when MND and HH sold our companies? We shall pay?

    • Liar. PF found $3 billion in reserves. They have ransacked the reserves and have even stopped telling the nation how much is in reserves like the MMD used to do.

    • @gonclaves
      $3B in reserve but no roads, poor hospitals etc. no wonder they had reserves. MMD is just a party of good ideas, once upon a time….but they never carried through their ideas.

      We can go around in circles all you want….

  7. which is better borriwing and have roads, schools, hospitals and upgraded HEPs or staying without credit but experiebce. poor road network, poor school facilities, long distabce to the Bomaa? If a person hates you he cant say you are beautiful. KEEP IT UP PF!

  8. This article is like mixing tea with Coffee at the same time… I know you are trying to prove a point but hello its non of the places Zambia is heading to.

    ARGENTINA’S Economy and borrowing is too big compared to Zambia–more than 100 billions dollars my friend. The facts of our comparison does not calibrate our current proceedings.

    Thank you for the article but its baseless and incomparable to Zambia.

    • Excellect @Wan**(rude, not!)Wawa

      In fact the only people jumping about on this article, are those people who have recognised a bond with Argentina. Argentina is home of the Cattle Ranchers(best beef steaks).

      No wonder it resonates well with supporters of a certain party and nature.

  9. “Is this where Zambia is headed?”
    The honest truth is “YES”. It hurts, but it is fact. If it walks like a duck, and quacks like a duck…. how on earth can it turnout to be an Eagle? This is a no brainer to any normal functioning adult. If we keep on doing what we have been doing, we will keep on getting what we have been getting. Period.

  10. This clarifies for all opposition that they have no solutions to persistent poor Market conditions. Thus is taken over a 10 year period, with parties in power coming and going. Unfortunately, as demonstrated by Argentinas experience, countries can go through repeating circles as they try to ‘upgrade’ the country by use of Bonds. We can argue all we like about borrowing, but in truth Zambia had fallen too far back to be able to create adequate wealth for itself and it’s citizens. We have tried to rejuvenate the economy by renewing infrastructure and creating more Investor interests by way of rejuvenating a private sector, but all the favourable conditions we give them include tax free everything, they are literally piggy backing on us. This us not going to be any different by…

    • This is not going to be different under a new party. They inherit the current problems and with markets worldwide crushing there is no good news for change of gov’t. We need stability, and we need to stop the politics of violence. Opposition parties need to be less confrontational and start to work with PF. We need to be debating in Parliament which Policies and economic instruments to apply. Opposition need to learn how to present. We need to hear your properly thought out arguments in relation to those. Politics of personality like HH are bunk and criminal!

    • To be truthful, the most annoying politician in Zambia is Hon. Chikwanda. He ought to be given a kick to the front stage by Lungu to fight these growing ideas in Zambia. He needs to come forward in campaign to uphold his offices decision. Not kept the President take a kick in this way.

  11. Patriot Abroad – wishful thinking. Chikwanda will leave as and when he wants. There are debates in Zambian Parliament that are useful. When the opposition opposes they say it is political.

  12. The unfortunate thing is that Zambian is one country where people don`t think about the future of their children. All they think about is tribe. I really feel pity for the kids in Zambia, their parents are so irresponsible when it comes to electing leaders.

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