In June 2018, the International Monetary Fund approved a loan to Argentina which envisaged disbursements until June 2021. In October of the same year 2018, the credit standby (one of the types of programs the agency offers to countries in financial difficulty) has been increased. The IMF approved $57 billion, the largest deal in the agency’s history.
Of the 57 billion US dollars, disbursed 45,000 million dollars. The last ride was July 16, 2019, nearly a month before PASO. Almost a year later, with the money pre-approved but no account movements for twelve months, the government of Alberto Fernández canceled show (July 24, 2020).
Three years later, the government is asking the IMF to advance an amount very similar to what it cleared in 2019. It is doing so to ensure that it reaches STEP this year without panic. Specifically, what Economy would be negotiating is $10,640 million that is pre-approved, but the program expects to be sent three installments (June, September and December). Sergio Massa, Minister of the Economy, could even go further and request 3,238 million dollars that the next government should already receive (2024).
This means that between the funds that the IMF is expected to transfer this year and next, Argentina would receive about 13,878 million dollars, a figure similar to the one rejected by Fernández in 2019.
Days before taking office in December of that year, the president thus announced that he would not ask the IMF for money. “An agreement that says they will send Argentina about 57,000 million dollars and so far they have given 45,000 million dollars, 12,000 million dollars remain. I have a problem and I’m going to ask for 11 billion more? I want to stop asking and let me pay”he told Radio with Vos.
The strategy had been decided by Martín Guzmán, the economy minister who would take over days later, and that the economist had advanced the proposal to Fernández, Cristina Kirchner and Massa himself. Guzmán “played” without Fund aid by restructuring dollar debt with private entities (80,500 million dollars) and calculated that if he then agreed with the IMF, he would arrive with petrol in the tank until 2023. It didn’t happen like that and Now the government is asking the IMF for money.
84% of the money provided by the agency in 2018-2019 was used largely pay off maturing debts. The rest to cover the fiscal deficit. Net reserves at the start of the government were approximately $38,000 million. Today they are negative.
Massa is negotiating against the clock with the IMF to get at least $10.64 billion. He thinks a body wave would send a signal to the market strong enough to reverse expectations. The central bank sold $470 million in just six rounds in May, and the average daily decline in private dollar deposits under Massa surpasses that under Silvina Batakis in July 2022, in the worst of the run since Guzman’s resignation.
The United States would support Argentina’s request. as reported by the Bloomberg agency this week. But only if the staff and board approve the move. According to sources familiar with the negotiations, there are countries on the Fund’s board that would not be in favor of dumping any more money in a program that has failed to bring inflation down and fails to meet one of the requirements imposed by the Fund: having the support of the government itself. Kirchnerism has voted against the current deal and while it is true that it has not opposed the rate hike -which it did in 2019-2022-, it does not approve of a dollar correction.
The consultancy firm 1816 risks in its latest report that the 10,640 million dollars they may not even arrive. “We insist that unless this happens with new funding, things won’t change much for one simple reason: between now and the end of the year, Argentina has to pay the IMF $11.3 billion.”
To convince the staff, Massa complied with three agency requirements: raise the price of the dollar -at least at the rate of inflation-, adjust rates and raise interest rates. But that’s not enough.
Then the Government resorts, at the end of its mandate, to that resource which it refused at the beginning of it. Like a circular structure. Of 10,000 million dollars.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.