Argentina: IMF approves US$ 7.5 billion agreement – 08/24/2023 – Market

The executive board of the IMF (International Monetary Fund) announced, this Wednesday (23), that it approved the fifth and sixth revisions of an agreement with Argentina, which releases an “immediate disbursement of about US$ 7.5 billion (about BRL 36.7 billion)”.

However, the Argentines will have to transfer part of the amount to other countries that lent money to the nation.

The South American country signed a credit program with the IMF in which the country receives US$ 44 billion (R$ 215 billion) in 30 months, in exchange for the Central Bank to increase its international reserves and the government to reduce the fiscal deficit. .

According to the IMF, with this Wednesday’s decision, total disbursements under the agreement reach US$ 36 billion (R$ 176 billion).

The Minister of Economy and presidential candidate of the government in the October elections, Sergio Massa, told the press after the meeting with the director of the IMF, Kristalina Georgieva, that the approval of the body “guarantees a framework of stability until the end of November”, when another revision of the agreement is envisaged.

The negotiation of the agreement between the technical team of the financial organization and Argentina lasted until last month, after weeks of negotiations, so that, in order to honor its debt commitments in August, Argentina had to resort to a loan from Qatar, yuan from an exchange rate swap (currency exchange) in effect with China and a bridge loan from the Development Bank of Latin America, through CAF (Corporação Andina de Fomento).

Of the US$ 7.5 billion, therefore, the Argentines will have to send a part to Qatar, China and CAF, and keep another part as a provision for the next maturities. The seventh review will take place in November.

Since the fourth review, at the end of March, “the main objectives of the program have not been achieved, as a result of the unprecedented drought and changes in the policies” outlined, the fund explained. Faced with this situation, the financial agency opted to approve “exemptions for non-compliance” with targets.

“Changes were also approved in the objective of accumulating reserves, as well as in the primary fiscal deficit and monetary financing of the deficit objectives”, highlighted the IMF.

Strengthen reserves

With inflation running at more than 100% a year, Argentina is facing a serious shortage of international currency reserves, amid a huge demand for dollars, the currency that Argentines turn to as a refuge in the face of rising prices.

Massa said on Wednesday (23) that, “in the last 21 days, US$ 1.7 billion” (a little over R$ 8 billion) in reserves was accumulated.

“In a context of high inflation and growing pressure on the balance of payments, a new package of measures was agreed, focused on strengthening reserves and reinforcing the fiscal order”, mentioned the international fund. Its “continuous and steady” implementation will be “fundamental” to “safeguard stability and ensure medium-term sustainability”.

Argentina closely monitors any decision by the body and, as it is an election year, the scrutiny is even greater.

The IMF loan to the country in 2018, during the right-wing government of Mauricio Macri, “means a mortgage for Argentina, which we have to live with until the moment we have the capacity to cancel the debt”, said Massa.

Massa blamed, on Wednesday (23), the IMF for the increase in inflation by forcing the country to devalue its currency. The BCRA (Central Bank of the Argentine Republic) devalued the peso by around 20% against the dollar the day after the August 13 primary elections.

Far-right liberal Javier Milei, an advocate of dollarization of the economy, won 30% of the vote. The governing Peronism, on the other hand, had 27%, and Massa was the elected candidate to run for president.

The IMF applauded both the devaluation and the hike in basic interest rates, measures it considered steps in the right direction.

During his two-day visit to Washington, Sergio Massa met with high-ranking US government officials and international organizations such as the World Bank and the IDB (Inter-American Development Bank), who pledged a loan of US$1.3 billion. (R$6.36 billion), in total, to Argentina for specific development projects.