IMF postpones payment of Argentina’s debt – 06/23/2023 – Market

The IMF (International Monetary Fund) agreed to postpone payment of part of Argentina’s debt by one week. Following the schedule, the country would have to pay US$ 2.7 billion (R$ 12.9 billion) to the agency this Thursday and Friday (21st and 22nd), but now the transfer can be made until the 30th.

The installment is part of the biggest deal in the history of the fund, which was signed in 2018 during the government of Mauricio Macri and was renegotiated in 2022 by the current president Alberto Fernández, totaling US$ 44 billion (R$ 210 billion). Of this amount, Argentina has already received US$ 29 billion (R$ 138 billion).

Now, the country is in the middle of new negotiations to make the requirements more flexible and accelerate the rest of the disbursements, seen as essential to avoid a worsening of the economic crisis and an even greater lack of control in inflation before the presidential elections in October.

The current agreement, signed in March 2022, obliges Argentina to increase its international reserves and reduce the fiscal deficit: from 3% of GDP (Gross Domestic Product) in 2021 to 2.5% in 2022, 1.9 % in 2023 and 0.9% in 2024. Economy Minister Sergio Massa is expected to travel to Washington soon to agree on the new rules.

According to the newspaper La Nación, the government has given indications that it will advance part of the payment of the installment of US$ 2.7 billion to Monday (26), before the deadline, in a nod to the board of the fund. The postponement, confirmed to the Sheet by members of the fund, it was a small respite, since the country will still have to pay a new installment of the same amount in July.

Argentina is experiencing a historic shortage of dollars in its coffers, mainly due to the high external debts contracted throughout its various crises. The country currently has just over US$30 billion in international reserves —to give you an idea, Brazil has more than US$340 billion—, but analysts estimate that the net values ​​are even lower.

What was already bad got worse due to several recent factors. Without credibility to attract foreign investment, the nation depends heavily on agricultural exports for foreign currency to enter, but a drought considered unprecedented hit the last crop of soybeans, corn and wheat, bringing down the production of the last crop.

Despite the fact that the IMF accepted in March of this year to revise “downwards” some objectives of accumulation of international reserves of the agreement, a new target has not yet been established.

In this context, Lula and the presidents of five other Latin American countries, almost all aligned to the left, this Thursday signed a letter to the president of the United States, Joe Biden, appealing for him to support Argentina in the negotiations with the fund. The document was delivered by the Ministry of Foreign Affairs of Argentina.

“We, leaders of the region, believe that it is possible to find a consensual solution that will allow Argentina to transform the situation it is in. It is neither feasible nor desirable that demands that do not duly consider the change in circumstances plunge Argentina into an unnecessary crisis that interrupts the ongoing recovery”, they argue.

Lula, Luis Arce (Bolivia), Gabriel Boric (Chile), Gustavo Petro (Colombia), Andrés Manuel López Obrador (Mexico) and Mario Abdo (Paraguay) also write that “the IMF’s inflexibility in reviewing the parameters of the agreement in the context of described drought runs the risk of turning a liquidity problem into a solvency one”.

“We respectfully and affectionately ask you to support Argentina in the negotiations it is carrying out with the IMF”, they add, calling for “a quick and effective solution for Argentina”.