IMF likely to withhold loan tranche for Argentina until policy fog lifts

The International Monetary Fund is unlikely to grant a US$5.4-billion disbursement to Argentina without knowing the economic policy plans of the government that takes over in December, according to people familiar with the situation.

The IMF can postpone the next disbursement in Argentina’s record US$56 billion credit line until having greater clarity on the policy landscape, according to the people, who requested anonymity because they aren’t authorised to speak publicly.

Argentina’s loan with the Fund faces fresh doubts after President Mauricio Macri’s unexpected defeat in the August 11 primary vote to Alberto Fernández triggered a major sell-off in the peso and sovereign bonds. IMF officials met Fernández, who hasn’t spelled out his economic policies, in late August, and he later criticised the Washington organisation in interviews and a statement.

On Thursday, IMF spokesman Gerry Rice said “the complex market conditions and policy uncertainty going forward make the situation even more difficult.” The next disbursement is scheduled for on or after Sunday. The election is on October 27.

An Economy Ministry spokesman in Buenos Aires declined to comment. Macri said last week that he expected the IMF to approve the disbursement because Argentina complied with the fiscal targets currently under review, which examine the country’s progress up until June, before the selloff hit.

The IMF sought to rebuild its battered image in Argentina with this programme after Macri sought help amid a currency crisis in May 2018. Fairly or not, Argentines blame the IMF for pulling its financial support from the nation in 2001 just weeks before a sovereign default severely worsened an economic crisis.

Analysts became increasingly pessimistic about the deal’s future in recent weeks after Macri’s government implemented capital controls, delayed debt payments and Fernández stayed mum on his own policy details.

“It makes me think that the disbursement will at least be postponed until after the election,” said Ezequiel Zambaglione, head of research at Balanz Capital in Buenos Aires. “I wouldn’t expect it in September.”