The International Monetary Fund (IMF) confirmed on Thursday that Argentina has requested an extension for debt maturities until after the general election on October 22.
The formal petition from President Alberto Fernández’s government comes with Central Bank reserves at worryingly low levels, turbulence in the exchange markets and runaway inflation peaking at 124.4 percent over the last 12 months.
Meeting international reserves payments would be difficult for Argentina and Economy Minister Sergio Massa, the presidential candidate for the ruling coalition, has his hands fall.
IMF payments were beginning to mount, hence Buenos Aires’ request. For the 10th month of the year, the country had a payment schedule with three disbursements: US$1.297 billion for principal maturities on October 9, a further US$648 million for the same item a week later and US$682 million to be deposited on Monday 30. It all amounts to US$2.627 billion.
The disbursement of US$7.5 billion made by the IMF in September included a surplus for Argentina to undertake those commitments until the next review.
After this request, the government will group them to cancel them in the last days of October.
“The maturity will be unified late this month with an operation called a ‘bundle’ – we’ve been doing for two years,” an important source from the Economy Ministry told Perfil.
“The authorities have exercised their rights as a member to group three repurchases [principal payments] which mature in October and to pay them by the end of the month [that is, on October 31[,” IMF sources have confirmed separately to the Noticias Argentinas news agency.
This operation allows member nations of the multilateral entity to unify outstanding amounts and cancel them all together by the end of the month, which was already last July.
However, these disbursements would be in addition to some US$800 million in interest maturities, to be paid on November 1, which may not be extended.
Consequently, between late October and early November, Argentina will have to pay, within a few hours, about US$3.4 billion.
This news comes within a very delicate context in terms of the Central Bank’s reserves and after days of foreign exchange volatility which do not help matters. On Wednesday, the Central Bank sold US$80 million, the highest amount since August 11, prior to the PASO primaries.
Currently, the total held in dollars by the institution is US$26.468 billion.
Over the last few days, the government finalised payments to the tune of US$228 million to different international organisations, the biggest being US$190 million to the Paris Club. The remainder was distributed among the International Bank for Reconstruction and Development (IBRD), the Andean Development Corporation (CAF in its Spanish acronym) and the Inter-American Development Bank (BID in its Spanish acronym).
This extension, in terms of the debt with the IMF, gives the ruling party some leeway to accumulate dollars and go to the polls with a more comfortable position on money markets within steep climbs for both financial and parallel exchange rates.
This postponement of the payment of maturities also comes amid the tense relationships between Economy Minister and presidential candidate for Unión por la Patria Sergio Massa and the IMF, currently headed by Kristalina Georgieva.
In the last few days, IMF spokesperson Julie Kozack analysed the recent economic measures announced by the minister and assured that they “exacerbate the country’s difficulties.”
“The economic situation remains very challenging and complex. Inflation is high, very high, and rising. Reserve buffers are low and social conditions are fragile,” she added.
In this vein, she held that the agreement “is not broken” and that the IMF’s objective is to “continue to help Argentina during these challenging times.”