Argentina had failed to repay 500 million USD in debt servicing with a maturity date of April 22, kicking off the country’s 30-day countdown. If the government fails to agree on the end of the foreign debt restructuring deadline, Argentina will go bankrupt again after declaring its ninth bankruptcy in its history in early April.

The country’s total debt amounts to 311 billion USD and represents over 90% of its gross domestic product (GDP).

The Economy Ministry has said it continues to seek a “sustainable debt profile” with international lenders.

“The Argentine Republic has ratified its willingness to pay, even in the challenging international context generated by the COVID-19 pandemic”, said the ministry.

The government’s decision was expected by investors after Economy Minister Martín Guzman last week suggested the country restructure about 65 billion USD in foreign bonds. The offer includes the issuance of new debt with lower interest rates and later maturities, as well as a three-year moratorium on external debt payments. The government says the plan will provide more than 40 billion USD in debt relief.

Bondholders, including some of the largest financial management companies in the world, rejected the proposal. They argue that this carries a disproportionate burden on international bondholders, while the government has not yet provided a clear, long-term plan for restoring financial stability.

Economists say private lenders are also unlikely to agree on a deal without the government first turning to pending debt payments to the International Monetary Fund (IMF). More than 40% of Argentina’s debt service over the next four years involves repayment to the IMF. The fund provided around 44 billion USD to Argentina after the 2018 currency crisis.

Argentina will use the 30-day period to try to negotiate with lenders to accept the proposal, which will be in effect until May 8. If creditors do not accept the offer, Argentina will be formally defaulted by the end of May.

This will be the country’s second bankruptcy in the last two decades.

The debt restructuring plan, presented to creditors on April 17, includes a three-year period during which the country will pay nothing and wiping out 62% of interest rates, or 37.9 billion USD, and 5.4% of the principal, or 3.6 billion USD.

The proposal includes a 20-day deadline for private creditors to respond.

Argentina was due to make its proposal in mid-March, but the coronavirus pandemic has delayed this trend.

According to Claudio Loser, a former IMF executive, negotiations on the Argentine debt will be complicated but not impossible.

Martin Schubert, founder of European InterAmerican Finance and advisor to retail investors in the talks, said emerging market governments could use the chaos around the pandemic as an argument for more generous restructuring conditions. But in his view, Argentina’s current proposal is not yet attractive to bondholders.

In 2001, the country experienced the largest bankruptcy in history (100 billion USD), and that would not be to its advantage during the forthcoming negotiations.

Martín Guzman said of the debt to the IMF that the government continues to work with the Fund in a constructive way on a new timetable for payments so that Argentina does not have to pay any principal payments to the fund over the next three years.

IMF Director-General, Kristalina Georgieva, said on March 20 that Argentina needs a major debt restructuring.

In the third-largest economy in Latin America, the unemployment rate reaches 40% and inflation exceeds 50%. The country has been in recession for 2 years and since March 20 has been in a national blockade until April 26 due to the coronavirus and, like other affected countries, is suffering severe economic damage.

The IMF predicts that Argentina’s economy will shrink 5.7% this year, while its residents fear it will lose their jobs.