IMF strikes preliminary Argentina deal as market return dims

The International Monetary Fund reached a staff-level agreement with Argentina on the third review of its US$20-billion loan programme, toning down language around the nation’s return to international capital markets.

The agreement, pending approval from the IMF’s executive board, would disburse US$900 million to the government of President Javier Milei. Most of the US$20-billion programme has already been sent in prior reviews. 

In a statement, IMF staff lauded Milei’s “prudent fiscal and monetary policies” and pointed to an improved balance sheet at the Central Bank, among other accomplishments.

Still, a key ingredient to Argentina repaying its IMF programme in the long term is its return to international capital markets, which Milei has postponed in hopes of securing lower interest rates.

Argentina’s sovereign bonds currently feature yields over 12 percent, which effectively close the window on a return in the near term. When yields were lower in April, IMF staff alluded multiple times to Argentina achieving “timely and sustainable access to international capital markets” during its second review. 

In the current review, “the authorities agreed to preserve readiness to access international capital markets when conditions permit and activate contingent credit lines as needed,” according to the IMF statement.  

IMF staff also referenced Milei’s government implementing “the remaining agreed steps” before sending the third review to the multilateral lender’s executive board for approval, but without providing further details.