Argentina to pay nearly 40% more interest to the IMF this year due to rate hike

Despite import restrictions and foreign exchange measures to take care of dollars, the government has to budget multiple currencies to pay interest to the IMF. The global rate hike to fight inflation is increasing the burden Argentina has to pay the agency, which will total $1,872 million this year. a 39% increase compared to 2021, according to Fund data.

Argentina pays due interest to the IMF on a quarterly basis in early February, May, August and November of each year. The account comes from debt balance, which is now US$39.3 billion. On November 1, interest was canceled for $521 million for the extraordinary credit contracted in 2018, to which will be added the charges for the new disbursements agreed in March of this year by the current administration.

In 2021, interest paid to the Fund amounted to US$1,348 million e next year they will reach 2,436 million dollars. “The increase in charges mainly corresponds to the fact that loans are tied to an interest rate linked to SDRs (the unit in which the IMF measures loans), which reflects a basket of international currencies from developed economies,” he said Sebastian Menescaldi. , Deputy Director of EcoGo.

Last August, the SDR rate rose to 146 points (1.46%), which implies an increase of 138 points since the beginning of the year. And in recent months it has continued to rise. “This rate was affected by the rise in global interest rates and, after reaching values ​​close to 0 at the beginning of the year, is now 2.666%. Like this, the financial burden nearly doubles and would amount to just over $2.4 billion in 2023,” Menescaldi explained.

In addition to the basic rate, Argentina pays a premium financial, which is an additional 2% for accessing a loan exceeding 187.5% of its quota and 3% for being in that situation for more than 3 years. The government has asked for the surcharges to be eliminated with the support of other countries, but the IMF rejects it. The president and Sergio Massa will resume the claim on Wednesday before the head of the IMF, Kristalina Georgieva, at the G20 summit in Indonesia.

On the other hand, the agreement reached last March will also increase the financial burden. “On the IMF side, you have the effect of raising rates because the FED (the central bank of the United States) is raising the rate and the IMF rate is tied to that rate, so you have the surcharge paid by Argentina and the ‘other element is that as the Fund makes new disbursements, new interest is generated“said Bruno Bonfanti, an analyst at Ecolatina.

How is the payment of the external debt done?

The largest external debt maturities over the next two years correspond to the IMF, including capital payments, according to a report by the consultancy. “Although in the June profile the maturities with the Fund are close to US$ 24,000 million, in reality this figure will exceed US$ 26,000 million, given that the arrival of new disbursements in the coming months will generate higher interest payable with the body”, estimates Ecolatina.

Most of the commitments with the IMF would already be funded by the current program with the organization, which foresees disbursements of almost $19 billion in 2023 and 2024. The remaining maturity gap would be covered with the SDRs sent by the Fund as a budget booster. That’s the problem too foreign currency is needed to pay bondholders $2.5 billion in 2023 and $4.4 billion in 2024.

At the same time, the authorities need dollars to comply with annual net reserve target of US$5,000 million with the IMF, one of the indicators examined by the Fund’s technicians who landed in Buenos Aires last Friday. After selling $1.4 billion since October, the central bank could end this year with $3.7 billion in net reserves, according to calculations by Agustín Berasategui, an economist at ACM.

In Economy, they consider the deals closed, as the ongoing review evaluates the period from June to September, in which all objectives have been achieved, e Only in March will the last quarter of 2022 be checked. Washington’s entourage, however, could ask for explanations for the deviations in the inflation assumptions, the dripping of reserves and the unpaid Treasury debt owed to the wholesale administrator of the electric system, Cammesa.

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