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ECONOMY | 22-06-2023 18:17

Argentina asks IMF to postpone due payments until end of month

Government winks at multilateral lender, looking to smooth payments as negotiations over agreement continue; Economy Ministry sends proposal for unified payment at end of month with expectation of prompt reply.

Argentina’s government has asked the International Monetary Fund (IMF) to postpone the debt payments falling due until the end of the month as negotiations over revisions to its existing deal continue.

IMF sources confirmed the news on Thursday, explaining that such a move is "the right of any member country."

Some US$2.7 billion is due this week, corresponding to the mega-loan of US$44 billion loaned by the IMF to Argentina under the terms of its record-breaking 2018 credit-line agreed by former president Mauricio Macri.

The government now aims to pay the sums falling due to the IMF next Wednesday and Thursday in a bid to advance towards an agreement for renegotiation. Massa intends to partially pay next Monday the sums owed the Washington-based organisation, as anticipated a fortnight ago as an alternative by the IMF, Ministry sources revealed.

Wednesday and Thursday were the days on which this quarter’s most onerous payments were to be made under the agreement, US$921 million and US$ 1.779 billion respectively.

Economy Minister Sergio Massa's team is negotiating a rescheduling of the payments and an advance of remittances, explaining that it could not comply with the objectives for accumulating reserves and cutting the fiscal deficit as a consequence of the ferocious drought hitting farm exports.

Government sources leaked that negotiations remained open without any proposal on the table for any complete payment, only a partial payment with the rest to be cancelled down the road once the remittances have been received.

The Economy Ministry sent the IMF a proposal for a unified payment at the end of the month instead of the two scheduled payments in hope of a prompt reply.

In case of acceptance, there will be a second proposal for an anticipated reimbursement of hard currency to Washington next Monday, calculated at some US$1.9 billion.

With this step the proximity of announcing a revamped announcement grew closer, bringing calm to the markets, which considered this an “advance” in Argentina’s goodwill to pay up, as well as showing the “capacity” of its reserves.

According to the sources consulted, the broad lines of an understanding are already there with the fine print due in the next few hours. To put pen to paper, Deputy Economy Minister Gabriel Rubinstein and Economy Ministry chief advisor Leonardo Madcur will be travelling next week to Washington with the minister himself joining them for the signature before June 30.

Among the main objectives of the economic team is the frontloading of the remittances for the rest of this year in order to compensate for the drought losses.

The negotiation between IMF officials and the government lies in how much can be advanced by the former and what percentage of that advance is to be destined to cancelling debt and how much may be used to intervene in money markets.

Meanwhile on Tuesday it was revealed that Latin American presidents were preparing a letter to send to United States President Joe Biden asking for the IMF to support Argentina, as confirmed by Mexican President Andrés Manuel López Obrador, who also accused the monetary organisation of being co-responsible for Argentina’s situation.

"They granted loans to Argentina beyond its capacity to pay for pre-electoral spending for (Mauricio) Macri to stay president," said AMLO.

The indebtedness destroying Argentina today is the cause of a flagrant and growing inequality" Brazilian President Luiz Inácio Lula da Silva had affirmed to IMF Managing Director Kristalina Georgieva while participating as a guest at the G7 summit.

 

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