🚀 June’s AI-picked stocks soar, with Adobe +18.1% in 11 days. Don’t miss July’s upcoming picks.Unlock full list

IMF, Argentina reach staff deal on loan reviews to unlock $7.5 billion

Published 07/28/2023, 11:29 AM
Updated 07/28/2023, 09:40 PM
© Reuters. FILE PHOTO: A customer pays for pork meat in a local market in Buenos Aires, Argentina March 14, 2023. REUTERS/Agustin Marcarian/File Photo

By David Lawder and Jorgelina do Rosario

WASHINGTON/LONDON (Reuters) -The International Monetary Fund said on Friday it has reached a staff-level agreement with Argentina to unlock about $7.5 billion and complete the fifth and sixth reviews of the struggling country's $44 billion loan program.

The agreement, which still needs IMF Executive Board approval, eases some program requirements because a devastating drought has created a "very challenging" economic environment in Argentina, causing some end-June financial targets to be missed.

Reuters first reported the agreement would combine the fifth and sixth reviews of Argentina's IMF program - a move that provides additional loan funds sooner. The IMF said its board would meet to consider the agreement in the second half of August.

The Fund said in a statement that since the fourth review of the loan program in March, Argentina's economic situation has become very challenging due to the larger-than-anticipated impact of a drought, which had a significant impact on exports and fiscal revenues."

"There have also been policy slippages and delays, which have contributed to strong domestic demand and a weaker trade balance," the IMF added.


To sustain demand for Argentina's peso currency, the agreement calls for authorities to ensure that policy interest rates remain "sufficiently positive in real terms."

The agreement projects a more gradual accumulation of reserves, with a target of around $1 billion by the end of 2023, compared to a $8 billion goal set in March.

The agreement calls for Argentina to tamp down import demand with new foreign exchange taxes for imported goods and to strengthen expenditure controls. But its 2023 primary fiscal deficit target remains unchanged at 1.9% of GDP, the IMF said.

With no liquid currency reserves in the central bank, Argentina has recently introduced more peso exchange rates to stop the drainage. The Fund said that the program will need waivers because these measures are "against the introduction of multiple currency practices."

The government will need to take some additional measures, known as prior actions, between the staff level agreement and the board approval, according to a source familiar with the matter, who asked not to be named because the measures are still not public.

The next review is expected to take place in November, a month earlier than originally scheduled.

Argentina is set to have another three reviews on its 2022 IMF program by September 2024, though the IMF statement didn't specify what would happen with those.

The IMF's board approval of the reviews would come after a primary vote on Aug. 13 in which Economy Minister Sergio Massa runs as one of the presidential candidates for the ruling coalition.

Massa said the fresh disbursement will provide some stability through the second half of the year. Following the announcement, Argentina's over-the-counter sovereign debt rose nearly 2% on average and the country's main stock index was up 1.68%.

The country still needs to avoid a default with the Fund next week, with maturities of $2.6 billion due on July 31 and almost $800 million due on Aug. 1.

Argentine officials are working to "get financing from several sources" to meet these obligations, the source added, without providing any further details.

© Reuters. FILE PHOTO: A customer pays for pork meat in a local market in Buenos Aires, Argentina March 14, 2023. REUTERS/Agustin Marcarian/File Photo

On Friday evening, the Development Bank of Latin America (CAF) approved a $1 billion credit for Argentina, a spokesperson from the economy ministry said.

Another option to help Argentina make the payments is a potential a swap line with Beijing, a move it recently made to complete part of its June payment to the IMF.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.