Fitch says Argentina's debt challenges go beyond liquidity

Credit: REUTERS/Agustin Marcarian

Oct 24 (Reuters) - Ratings agency Fitch said on Thursday Argentina's weak credit fundamentals, in terms of both liquidity and solvency, limit the scope for a debt exchange that minimizes losses for investors beyond maturity extensions.

The Latin American country has been struggling with a major debt crisis after a market crash in August hammered its peso currency and sovereign bonds, forcing it to delay payments on about $100 billion of debt.

Fitch said a deal that offers the country minimal debt relief focused on liquidity rather than sustainability would require too much of a fiscal adjustment to be politically or economically viable.

The passage of such a deal would come with a high risk of renewed debt distress in the future if there is no unforeseen positive economic shock in Argentina, the ratings agency said.

Fitch said it believes a deal that offers permanent debt relief via a haircut or coupon reduction, rather than just postponement of debt service, could be needed to more fully mitigate Argentina's debt sustainability challenges.

(Reporting by Nishara Karuvalli Pathikkal; Editing by Maju Samuel)

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