Argentina will have to opt for production-based policies, not more cuts to public spending to get out of its “virtual default”.

This is according to Argentina’s new economy minister Martin Guzman.

Argentina’s economy is “extremely fragile” said the economy chief in his first news conference after taking office on Tuesday.

Guzman pledged to adopt a non-dogmatic approach to policymaking while keeping a constructive relationship with the IMF and other creditors.

However, he added that Argentina’s present agreement with the fund had failed and needs to be overhauled, Reuters reports.

The country has said it must renegotiate around $100 billion in bonds and loans.

Guzman went on to say in the news conference: “The year 2020 is not a year in which fiscal adjustment can be made. A larger fiscal contraction would deepen the recession and aggravate the problem.”

The new economy head has to negotiate restructuring talks with international bondholders and the IMF in regard to its $57 billion standby loan agreement.

He added: “We need to solve the virtual default problem left by the previous administration.” 

In the presidential election in October, President Fernández defeated incumbent Mauricio Macri, who lost popularity with the tight fiscal policies sanctioned by the loan deal he reached with the International Monetary Fund last year.

As markets were concerned about Argentina’s debt-paying ability, Macri was forced into the deal with the IMF to stop a run on the peso. During Macri’s term, the peso lost over 83% of its value against the U.S. dollar.

Guzman added: “We want to have a constructive relationship with all creditors: with private bondholders and with the International Monetary Fund.

“Based on this constructive spirit, we will establish with our creditors a modification in our debt profile,” Guzman said. “We have already had conversations with the IMF, there is already a recognition of the failure of the previous program.”

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