Argentina and Paris Club creditors agreed on an arrangement to clear overdue debt payments over a five-year period, raising the prospect of international aid as the nation tries to repair its finances.

Argentina will repay the arrears, which amounted to $9.7 billion at the end of April, according to an e-mailed statement from the club, an informal grouping of creditor nations. The first payment of a minimum $1.15 billion will be settled by May 2015 and another will be due in May 2016, it said. The Argentine economy ministry said in a statement that it will make an initial capital payment of $650 million this July and $500 million in May 2015.

The payments are a “necessary and important step for the normalization of financial relationships between Paris Club creditors and Argentina,” the grouping said in the statement. “Paris Club members’ export credit agencies that wish to do so will resume their export credit activities.”

Argentina, which defaulted on a record $95 billion of debt in 2001, is trying to resolve disputes with creditors as it seeks a return to capital markets to reverse a drop in foreign reserves and avoid a balance of payments crisis. President Cristina Fernandez de Kirchner, who last year created a debt restructuring unit headed by former Economy Minister Hernan Lorenzino, is battling holders of defaulted bonds in U.S. courts while trying to satisfy International Monetary Fund demands to improve the accuracy of official economic data.

Amount Dispute

The Paris-based group of creditors which includes Japan, the U.S., Germany and France, invited Argentina to negotiate after it received a revised repayment proposal, club spokeswoman Clotilde L’Angevin said March 14. Argentine Economy Minister Axel Kicillof traveled to France on Jan. 22 to present an initial proposal. Argentina’s foreign reserves have tumbled 27 percent in the past year to $28.5 billion.

The two parties disputed the exact amount Argentina owes the club. The grouping calculated debt with interest at about $10.1 billion whereas Argentina estimated the amount at about $9.1 billion, Ambito Financiero reported May 26, citing sources in Argentina it didn’t identify.

The nation settled $677 million of arbitration claims last year and held talks with the IMF on overhauling its statistics. The government is appealing U.S court orders to pay holders of defaulted bonds, including hedge fund manager Paul Singer, about $1.5 billion. It unveiled a new inflation index on Feb. 13 that showed prices rising about three times as much as previously reported after the IMF censured the nation last year.

Inherited Debt

Fernandez agreed to pay Repsol SA for a 2012 expropriation of its 51 percent stake in energy producer YPF SA. The Spanish oil company received $5 billion of bonds as compensation. Argentina is willing to resolve “inherited debt” from previous governments and was about to pay the Paris Club in 2008 before the collapse of Lehman Brothers Holdings Inc., Kicillof said Jan. 21.

The origin of the Paris Club dates back to 1956 when Argentina first met its public creditors in Paris. Since then, the grouping has reached 429 agreements with 90 different debtor countries. Since 1956, the total debt of club agreements has amounted to $573 billion.

Bloomberg