As negotiations continue with the International Monetary Fund to renegotiate the current agreement, The government will postpone debt payments until the end of January with the organization that expire on January 9th for 1,300 million dollars and on the 16th of the same month for 650 million dollars.
Official sources report that “it is very likely” that this will happen unify the deadlines for the month, a measure provided for by IMF regulations. Argentina has already done so last June, July and October during Sergio Massa’s mandate at the Ministry of Economy, with the approval of the Washington authorities.
The grouping of payments (called “grouping“) can only be done if there is more than one payment in the period. Since there was only one commitment in December, Javier Milei’s government could not postpone the deadlines and resorted to a CAF bridge loan of $960 million to pay off the December 21 commitment.
The Fund was instrumental in promoting CAF funding to the new government. The credit was approved two days after the sharp devaluation, which caused the dollar to jump 118%and the implementation of the second largest fiscal adjustment in 40 years. However, the financial outlook is still uncertain.
The agreement provides for the disbursement of 6.5 billion dollars until September 2024, of which $3.3 billion was due to arrive in November. AS Argentina failed to achieve its goalsthe funds remained in limbo and the Minister of Economy, Luis Caputo, had to ask for a financial “bridge” from the United States and the IMF.
Now Caputo continues to negotiate the program agreed in 2022 to refinance the $44 billion loan taken in 2018. For now, there are no signs about the possible arrival of fresh funds. But in the last two weeks, contacts multiplied with the United States, the Fund’s main shareholder.
The White House is carefully measuring its next steps. During his visit to Argentina, the number two of the US Treasury, Jay Shambaugh, wanted to know how feasible the package of measures is and showed his concern about the increase in withholding taxes which the Government ended up including in the mega bill sent to Congress.
“Generally, The Fund doesn’t like taxes on foreign trade“revealed an economist who met Shambaugh. The fiscal chapter is fundamental: it represents 2.2 points of the 5 points that Caputo proposed to save to achieve fiscal and financial balance, a more demanding objective than that requested by the Fund.
The organization also examines subsidies, the future of exchange rate and the uncontrolled inflation which in December could reach a monthly record of 30%. This flash, with a strong impact on poverty, and the reduction in rates serve to reduce the quasi-fiscal deficit in real terms and liquidate monetary liabilitiesincluding peso deposits.
The dollar front is no less challenging. With negative reserves, the idea is build another bridge until the thick harvest of March from dollars coming from exports encouraged by the latest devaluation.
Since December 11, the Central Bank has already accumulated 2 billion dollars from purchases on the foreign exchange market. The Government is considering using these resources to pay bondholders the $1.6 billion due on Saturday 6 January. Of this amount, half are securities held by the State.
For now, there is little prospect on Wall Street that the International Monetary Fund will advance $15 billion in funds, as had been reported.
“I don’t think the IMF will increase its exposure to Argentinaat most payments and disbursements can be reorganised to give Argentina oxygen while the reforms are implemented and until the dollars from the gross harvest come in, but 15 billion dollars seems too much, Caputo has already denied it”, underlined by a foreign investment fund.
Source: Clarin
