BUENOS AIRES (Reuters) - Argentina is willing to pay its debts but does not have the money to do so, Economy Minister Martin Guzman said on Wednesday, warning of a “a deep debt restructuring” ahead.

Slideshow ( 3 images )

In an address to Congress, Guzman blamed austerity policies prescribed by the International Monetary Fund for the credit crisis.

But as IMF officials arrived in Buenos Aires for a week of talks about the coming revamp of loans and bonds, Guzman said there was “a growing mutual understanding” about how to handle the problem.

Argentina says it needs to rejig $100 billion in debt, including $44 billion owed to the fund, its biggest single creditor. The government, which took office in December, has vowed not to continue paying what it calls the unsustainable debt load it inherited from the previous administration.

“There will have to be a deep debt restructuring and it is clear there will be frustration on the part of bondholders,” Guzman told lawmakers. He vowed to rebuff the kind of fiscal austerity policies that the IMF typically recommends to cash-strapped countries seeking loans.

“There is nothing worse for a country in recession than austerity,” Guzman said, adding that the government would not try to reduce its primary fiscal deficit this year. A lower deficit had been a key part of Argentina’s 2018 IMF loan deal.

Latin America’s No. 3 economy is expected by private analysts polled by the central bank to shrink 1.5% in 2020 with inflation seen easing to 41.7% from over 50% currently.

Bondholders are apprehensive about the restructuring.

“Demand for local assets remains low amid ongoing debt restructuring discussions,” a note from JP Morgan said on Tuesday after the government postponed a $1.47 billion principal payment on its AF20 bond until Sept. 30.

The payment had been scheduled for Thursday.

The government voided a local debt auction on Monday because of scant investor appetite, and Argentine bond prices remained down for the week despite a partial bounce-back on Wednesday.

The IMF meetings in Buenos Aires will last through Feb. 19. The government hopes not only to clinch a deal to postpone loan payments owed to the fund, but to get the lender’s approval of its plan for restructuring bonds.

Former president Mauricio Macri lost his 2019 re-election bid after public utility subsidy cuts and other fiscal tightening measures weighed on the economy and hurt his popularity. The new president, Peronist Alberto Fernandez, campaigned on an anti-austerity platform.

As Guzman spoke, thousands of members of leftist social groups marched in front of Congress against the IMF’s policies. Many Argentines blame the IMF for the country’s 2001 economic crisis that tossed millions of middle-class people into poverty.