Monday, July 22, 2024

ECONOMY | 29-06-2023 18:22

Argentina to make US$2.7-billion as IMF negotiations continue

Government set to make payment due in June to the International Monetary Fund. In order to avoid a further dollar haemorrhage, payment will be made in part in Chinese currency, with the rest from unused Special Drawing Rights.

Argentina’s government will make a US$2.7-billion payment owed the International Monetary Fund (IMF) as negotiations over the drafting of the country’s extended fund facility agreement continue.

Economy Ministry sources confirmed Thursday that the funds owed last month to the IMF were " activated today [June 29] without touching dollars." The source added that “US$1.9 billion will be in special drawing rights and the rest in yuan."

The source of the Chinese currency is a debt-swap deal under which Argentina will pay back as soon as the IMF board of directors approves a new remittance. It remained unclear at press time whether the government would pay the IMF directly in yuans or would first change them into dollars. 

According to the sources, the funds met by special drawing rights, or SDRs, were left over from previous payments to the IMF.

Paying the IMF in Chinese currency is highly unusual and reflects the lack of liquidity in Central Bank reserves. Estimates say they could fall below US$31 billion as a result of the latest payment. International currency holdings stood at US$43.78 billion when the Alberto Fernández administration took office on December 10, 2019.

Within the next week Argentina will have to pay a further US$1.3 billion as its first July payment.

Argentina is attempting to avoid entering into default amid the risk of the entire ongoing programme collapsing. There have been prolonged conversations for several weeks between IMF staff and Argentine officials to seal a new deal for the programme of this country’s US$44 billion debt-load. If the US$2.7 billion had not been paid by yesterday, Argentina would not be able to use special drawing rights for subsequent payments, according to IMF rules.

In recent weeks, Economy Minister Sergio Massa has been briefing that a deal is imminent. Following confirmation of his presidential candidacy for the ruling Unión por la Patria coalition, officials said Monday that negotiations would be closed in the following week and the new programme guidelines disclosed.

Massa is confident that he can reach a redrafted extended fund facility agreement running up until the end of 2026. According to the Télam state news agency, this would permit him to count on advances topping US$10 billion in the rest of the year. 

During a presentation to construction industry leaders last Tuesday, Massa gave a small clue in indicating that the agreement could skip the quarterly stages for general guidelines covering all the second half of this year.

Until now the markets have been operating calmly, taking it for granted that Argentina and the IMF will arrive at an understanding.



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