Argentina has reached a deal with IMF staff, says president

Argentina's President Alberto Fernández said his government reached an agreement with the staff of the International Monetary Fund on some details needed to refinance the country’s loan with the Washington organisation and aims to send it to Congress for approval as soon as this week.

In his annual address to Congress on Tuesday, Fernández also said that some other “aspects” of the deal with IMF staff continue to be worked out and expects them to be completed soon before congress takes it for debate, apparently contradicting his initial statement. The president didn’t elaborate on the points of disagreement.

Under the agreement, Argentina will only start repaying the existing loan, currently worth more than US$40 billion, in 2026, he said.

“The Argentine government has now reached an agreement with the staff of the International Monetary Fund to put forward a programme that lets us refinance the debt,” Fernández told lawmakers in Buenos Aires. “It’s an agreement without austerity policies and with increases in real spending in every year of the programme.”

The IMF press office declined to immediately comment on Fernández's remarks. Local press including Clarín newspaper reported after the speech that the government had reached the deal with IMF staff in the early hours of Tuesday.

An agreement with the staff of the IMF on specific targets and detailed policies is a necessary step for the government to send the plan to Congress to be approved by lawmakers as required by law. The plan will then be presented to the IMF’s board of directors for the final rubber stamp.

In addition to the political opposition, Fernández will face the challenge of convincing lawmakers from the more radical-left faction within his own coalition to support it. It’s also uncertain if the deal will have sufficient support from the IMF’s board, with US officials saying earlier this year that Argentina needs to put forward a credible economic plan.

In late January, the government announced a first understanding with the IMF staff on the path of reducing its primary fiscal deficit and monetary financing. The tentative pact is the latest chapter in Argentina’s tumultuous relationship with the Fund and once approved will mark the country’s 22nd programme with the organisation since 1958.

The deal would effectively reschedule the country’s payments owed to the lender stemming from a record IMF bailout given to the previous government in 2018 that failed to stabilise the economy. Talks between Argentina and the IMF gained momentum in the past weeks as the Latin American nation nears a late March deadline in which it must make payments of about US$2.8 billion amid razor-thin reserves.

In his speech, Fernández also said the IMF agreement wouldn’t include pension or labour reforms.

Argentina’s dollar-denominated international bonds have hovered above 30 cents on the dollar for several months and were little changed on Tuesday on low expectations that the deal would fix the economy’s longstanding problems. Local markets were closed Tuesday for a national holiday.

Fernandez in addition announced that China has confirmed it will expand its currency swap line with Argentina, saying that the Asian nation “has always supported us in our difficult moments.” Fernández didn’t specify how much the swap line, currently about US$20.6 billion, would increase by.

Other details from the speech:

– Argentina’s economy grew 10.3 percent in 2021
– Argentina will remove energy subsidies for wealthiest 10 percent of users
– For rest of society, energy fee hikes to remain below salary increases
– Argentina looks to double exports to US$170 billion by 2030
– Fernández made a general call for peace in the world without specifically condemning Russia’s invasion of Ukraine