oann

IMF and Argentina agree on loan reviews, unlocking $7.5 billion.

ReutersJuly 29, 2023

IMF Reaches Agreement with Argentina to Unlock $7.5 Billion

By David Lawder and ‍Jorgelina ⁤do Rosario

WASHINGTON/LONDON (Reuters) -⁣ The International Monetary Fund ‌(IMF) announced on Friday that it has reached a staff-level agreement with Argentina, paving the way for the release of approximately $7.5 billion. This agreement marks the completion ‍of the fifth and sixth reviews of Argentina’s $44 billion loan ‍program.

The agreement, which⁢ is still ⁣pending ⁤approval from the IMF Executive Board, takes into account the challenging economic environment⁣ in Argentina caused by a devastating drought. As a result, certain financial targets for the ‍end of ‍June were not met.

Reuters was ⁤the first to report on the agreement, which combines the fifth and sixth reviews of⁤ Argentina’s IMF program. ⁢This ⁤move allows for the earlier disbursement of additional loan funds. The IMF stated that its board will convene ⁣in the second half of August to consider the agreement.

According to the IMF, Argentina’s ‍economic situation has become ⁤increasingly challenging since the fourth review of the‌ loan program in March. The drought had a‌ larger-than-anticipated impact on exports and fiscal revenues, leading to ‍policy slippages and delays that contributed to a weaker trade balance.

Measures Ahead

To stabilize Argentina’s peso currency, the agreement calls for⁤ authorities to maintain policy interest rates‌ at a sufficiently positive level in ‌real terms. ⁤Additionally, the agreement sets a target of around $1 billion in reserves by the‌ end of 2023, compared to the⁣ previous goal of $8 billion set in March.

Furthermore,‍ the agreement includes measures ⁤to reduce import⁢ demand through new foreign ⁣exchange taxes and⁤ strengthen expenditure controls. However, the⁢ IMF stated that the target for Argentina’s⁣ 2023 primary ‍fiscal⁤ deficit remains ⁢unchanged at 1.9%‍ of GDP.

Given Argentina’s lack of liquid currency reserves in the central bank, the program will require ⁤waivers as the country introduces more peso exchange‌ rates to prevent further ⁢drainage.⁢ These measures are considered to‍ be “against the introduction of multiple currency practices.”

Prior to board approval, the government will need to implement additional measures, known as prior actions. The ⁣next review is scheduled for November, ⁢a month earlier than originally planned.

Argentina is⁢ expected to⁤ undergo three more reviews of its 2022 IMF program by September 2024,‍ although the IMF statement did not provide specific details on this.

The‍ IMF’s board‍ approval of the reviews will come after⁤ a primary vote on August 13, in which Economy Minister Sergio⁣ Massa is running as ‍one of the presidential candidates‍ for the ruling coalition.

Massa expressed that the fresh ‌disbursement will bring stability to the country in the ⁢second half of the year. Following the⁣ announcement, ⁢Argentina’s ‌over-the-counter sovereign ‍debt rose nearly⁢ 2% on average, and the country’s main stock index ‍increased by 1.68%.

However, Argentina‍ still faces the challenge⁣ of avoiding ⁣default with the IMF next week, with ‍maturities of $2.6 billion due ⁣on July 31 and almost ‌$800 million due on August⁣ 1.

Argentine officials are working to secure financing from various sources to meet these obligations, ⁣although no further details were ‌provided.

On Friday evening, the Development Bank of Latin America ⁤(CAF)⁣ approved⁣ a⁢ $1⁣ billion credit for Argentina, ⁤according to a spokesperson from‍ the economy ministry.

Another potential option to help Argentina make‍ the ⁤payments is a swap line with Beijing, similar to the one recently used to ‌complete part of its June payment to the⁤ IMF.

(Reporting by David Lawder in Washington and Jorgelina do Rosario in London; Additional reporting‍ by Walter Bianchi in Buenos⁢ Aires; Editing by⁢ Hugh ⁤Lawson, Alistair Bell and Lincoln Feast)