Thursday, July 18, 2024

ECONOMY | 22-12-2021 17:18

Reserves drop as Argentina makes US$1.9-billion payment to IMF

Central Bank reserves fall after Argentina made a US$1.9-billion payment to the International Monetary Fund on Wednesday; Talks over new financing programme set to resume in January.

Argentina made a US$1.9-billion payment to the International Monetary Fund on Wednesday, as talks to agree a new financing programme with the multilateral lender continue.

"It has already been formalised and paid without problems," a government source told the Ámbito Financiero newspaper.

Another official source explained to AFP that the payment "is an automatic debit that is executed with the opening of the day in New York."

The Central Bank's reserves stood at US$39.153 billion on Wednesday according to official data, US$1.956 billion less than at the end of the previous day.

The payment, reportedly made with funds the country had received from the IMF’s special drawing rights scheme, fell due under the terms of Argentina’s 2018 bailout.

It was made after a local court on Tuesday rejected an injunction filed by the head of state-owned Banco Nación, among others, that sought to prevent repayments to the agency while the legitimacy of the debt is "being investigated."

The government wants to close a new agreement with the IMF regarding the record US$57-billion loan granted to the Mauricio Macri government (2015-2019), of which Argentina has received US$44 billion. Fernández rejected the remaining tranches after taking office in December 2019.

Under the current terms of the agreement, Argentina is obliged to make payments on the principal in 2022 and 2023, with more than US$19 billion due each year. Just under US$5 billion is owed in 2024.

To date this year, Argentina has paid the IMF around US$1.38 billion in interest payments and around US$3.8 billion in repayments on the principal. 

The government intends to include the outlines of any new agreement with the IMF in a multi-year economic plan that Fernández promised to send to Congress.

Talks with the IMF at present are focused on Argentina’s fiscal deficit and the tools available to the national government to reduce it at a speed that will allow it to recreate a surplus in the shortest possible time to ensure the repayment of debt to private and institutional creditors. 

Fund officials say this will help to curb inflation and that the same request was made to Macri when he agreed the 2018 record credit-line. 

Earlier this month, Presidential Spokesperson Gabriela Cerruti said that the government would consider calling extraordinary sessions outside of when Congress normally meets in order to discuss any agreed deal with the Fund.

"We understand that this will take place during the extension of the ordinary sessions or in extraordinary sessions that will have to be called in January or February, she said.

According to local reports, talks between the two parties are set to resume in the second week of January.

Economy Minister Martín Guzmán has previously said the government wants to close a deal before March.

Argentina's economy is now rebounding after a 9.9 percent slump in gross domestic product last year amid the coronavirus pandemic. In the first nine months of this year, the country has recorded growth of 10.8 percent.

President Fernández's ruling Frente de Todos coalition recently suffered a setback in Congress after it failed to pass the 2022 Budget bill, which forecast four percent growth in 2021 and an annual inflation rate of 33 percent. 

Prices have increased by more than 50 percent over the last 12 months.



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