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ECONOMY | 24-08-2023 01:04

IMF approves US$7.5 billion for Argentina despite missed targets

Multilateral lender approves massive disbursement, extending a financial lifeline to government ahead of a tight presidential race; Sergio Massa holds talks with Kristalina Georgieva in Washington.

The International Monetary Fund's (IMF) executive board on Wednesday approved a US$7.5-billion disbursement for Argentina, despite the multilateral lender admitting that the government had missed key financial targets.

The agreement combines the fifth and sixth reviews of an existing 30-month, US$44-billion IMF programme, in a move aimed at improving the dire economic situation. 

President Alberto Fernández’s government is grappling with a prolonged economic crisis with annual inflation running at more than 113 percent. Last week the Central Bank devalued the peso steeply in response to a turbulent PASO primary election.

Economy Minister Sergio Massa travelled to Washington DC for talks with US government officials, regional lenders and IMF Managing Director Kristalina Georgieva this week, seeking to maximise the financial lifelines available to the country. 

"Since completion of the fourth review, key programme targets were missed reflecting the historic drought along with policy slippages," the IMF acknowledged in a statement. 

"Against the backdrop of high inflation and rising balance of payments pressures, agreement was reached on a new policy package centred on rebuilding reserves and enhancing fiscal order," it continued.

The Fund also said the board had granted waivers of non-observance for “the introduction of temporary measures that gave rise to introduction or intensification of exchange restrictions and multiple currency practices.”

Modifications to targets for the accumulation of Central Bank reserves, the primary fiscal balance and the monetary financing of deficit targets were also approved.

Wednesday's announcement brings the total disbursements by the IMF to Argentina under the arrangement to around US$36 billion, with the next review scheduled for November, the IMF said.

Massa told reporters Tuesday that he did not expect the upcoming election outcome to affect the November disbursement.

The August disbursement will be used to pay back the IMF from a previous bailout as well as other lenders that helped Argentina make some IMF payments. The government has borrowed special drawing rights from Qatar, tapped a currency swap line with China, and obtained a bridge loan from a Caracas-based development bank.

News of the disbursement’s unanimous approval by the board of the multilateral lender was broken by an aide from Massa’s team. It was later confirmed by the Fund.

Massa, who is also running as the ruling coalition’s presidential candidate in the October elections, travelled to Washington this week to meet with senior IMF, World Bank and Inter-American Development Bank officials, as the international financial institutions considered separate decisions relating to the country. 

On Tuesday, the World Bank approved two new projects for Argentina worth around US$650 million which are targeted at increasing access to financing for climate change mitigation and adaptation, and strengthening existing food programmes. 

The projects are aimed at helping Argentina "lay the foundations for more sustainable and resilient growth and improve the efficiency of public services and social protection," Marianne Fay, the World Bank's country director for Argentina, Paraguay and Uruguay, said in a statement announcing the decision. 


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