Argentina’s Senate approved the government’s US$45-billion agreement with the International Monetary Fund on Thursday, clearing the way for its final approval by the lender’s board of directors.
In a 56-13 vote with three abstentions, senators passed the legislation underpinning Argentina’s latest IMF programme after a marathon session that ended past 11pm in Buenos Aires. The plan will now need to be voted on by the IMF’s Executive Board to take effect.
A date for the meeting has not yet been set, IMF Spokesman Gerry Rice said Thursday.
A positive vote by the IMF’s board approval would finalise the deal after two years of negotiations with technical staff and mark the country’s 22nd agreement with the multilateral lender. The plan allows Argentina to refinance upcoming payments owed to the IMF from a record bailout granted in 2018 to the previous administration that failed to stabilise the economy.
The timing of the board’s vote will be key to determine whether the country goes into default with the multilateral lender. The country must make payments of about US$2.8 billion by March 22. Once the deal is approved by the board, Argentina will almost immediately receive about US$9.8 billion from the IMF. The rest of the disbursements are contingent on Argentina accomplishing targets in the programme that are assessed during quarterly reviews with IMF staff.
President Alberto Fernández’s unusual step of making the legislature vote on the agreement exposed a divide with opposition lawmakers and within his own left-wing coalition.
The bill was approved in the lower house of Congress last week after lawmakers changed the text to only vote on the IMF’s financing, but not on the government’s economic policies in the programme.
Economists have already noted that the projections in the agreement will be tough to meet, even before it’s finalised. Officials are forecasting annual inflation this year to cool between 38 to 48 percent from the current level of 52 percent. But banks, such as JPMorgan Chase & Co, are now forecasting inflation above 60 percent in Argentina this year due to factors including rising global food and commodity prices.
by Patrick Gillespie, Bloomberg