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ECONOMY | 31-03-2023 19:48

IMF board approves US$5.3-billion loan disbursement for Argentina

International Monetary Fund’s executive board on Friday approved a US$5.3-billion disbursement to Argentina, a key step forward in the government’s programme that’s faced setbacks amid a worsening economic outlook.

The International Monetary Fund’s executive board on Friday approved a US$5.3-billion disbursement to Argentina, a key step forward in the government’s programme that’s faced setbacks amid a worsening economic outlook.

The board approved the funds after IMF staff finished the fourth review of Argentina’s US$44.5-billion deal, according to the people, who asked not to be identified without permission to speak publicly.

The IMF press office declined to comment. An Economy Ministry spokesman in Buenos Aires didn’t immediately respond to a request for comment.

Argentina’s 22nd IMF programme in history – the most of any member country – stumbled out of the gate a year ago with lawmakers in the government’s own coalition voting against the agreement. It is the largest assistance programme currently under IMF implementation.

The new disbursement brings to US$28.9 billion the total funds already allocated to Argentina since the start of the assistance programme in March 2022.

The programme has since faced heightened uncertainty before a looming recession and October’s presidential election, with annual inflation in Argentina surpassing 100 percent last month.

The IMF earlier this month called on Argentina to make stronger efforts to address foreign reserve losses, galloping inflation and other “policy setbacks” amid a severe drought that’s hitting the country’s crucial commodities sector.

Argentina requested to a change to a key target in the programme, known as net reserve accumulation. Net reserves, or the stockpile of cash at the Central Bank, is seen as crucial to preventing a major currency devaluation.

Earlier in March, the government expected to reduce the 2023 reserve target in the IMF deal by about US$2 billion, according to two senior government officials who requested not to be named to discuss unpublished figures. That would bring the annual reserve target down to roughly US$2.8 billion from the current US$4.8 billion stipulated in the last IMF review.

President Alberto Fernández visited US President Joe Biden at the White House this week and said afterwards that his US counterpart committed to supporting Argentina at the IMF and other multilateral institutions.

The United States is the nation with the greatest voting rights at the IMF. 

Argentina recorded 5.2 percent economic growth in 2022, a slowdown compared to 2021, but still tallying a second consecutive year of expansion, the first such two-year period of growth since 2010-2011.

Inflation, however, remained high at 94.8 percent, preventing the country from reaping the benefits of this upturn in activity.

Soaring inflation means most goods cost double what they did this time last year, and marks the return of near triple-digit inflation for the first time since the early 1990s. 

A week ago Fitch Ratings downgraded Argentina's foreign currency debt to one level above default.

The debt downgrade from CCC- to C suggests that the ratings agency believes a default is "imminent," and comes shortly after a government decree forcing domestic public sector entities to swap their foreign currency-denominated debt for debt denominated in the domestic currency, the peso.

 

– TIMES/AFP/BLOOMBERG

 

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