This year Argentina will have to pay the IMF a sum equal to 7,285 million dollars. Part of this figure is Mauricio Macri’s 2018 loan write-offs or repayments (key maturities), amounting to $4,487 million. The other, $2,798 in interest.
The data comes from the Finance Secretariat of the Ministry of Economy.
The proportion indicates that almost 40% of payments to the organization this year will come from interest (38%). It will double by 2023 if we take into account that last year it was 18%..
Daniel Marx, former Finance Minister and debt negotiator in several Argentine governments after the return of democracy, explains one of the reasons for the increased burden of interest on the money paid to him by the IMF. “It’s because there aren’t as many capital maturities with the IMF this year, that’s why the proportion changes.”
In 2023, Argentina paid the IMF approximately 17,000 million dollars for the capital lent in 2018. And in 2024 – again according to the Economics sheets -, the maturities would be much lower: 4,487 million dollars (this is because the payments of the first disbursements of Macri’s stand-by, which were the most substantial and in 2023 the impact was May).
All this financial engineering automatically means that the interest burden becomes proportionately more relevant in 2024.
There is a second reason why the interest payment rate increases. “The interest rate has increased significantly around the world and the IMF rate is floating on a basket of currencies”explains Marx. “All interest rates have gone up.”
Faced with rising inflation resulting from the pandemic and Russia’s invasion of Ukraine, the Federal Reserve began raising rates from 0 to 5.5% in March 2022 in what was the most severe monetary tightening of the last forty years of activity of the Federal Reserve. Therefore, the interest rate paid by Argentina to the Fund doubled.
Over the next ten years the country will have to pay the IMF 16,261 million dollars in interest and 39,990 million dollars in capital, according to the economic prospectus as of September 30 (latest data available).
The interest rate applied today by the IMF is 4%. It is the highest in the last fifteen years. Since Argentina pays interest (1% more) and also surcharges for late payment of loan installments following refinancing (roll over), the total interest rate is higher. According to an estimate by economist Jorge Neyro it could be around 7.5/8%.
Argentina is currently negotiating an outlay of $3.4 billion with the IMF. This is the money available according to the type of agreement signed with the organization for this phase of the program and which corresponds to the seventh revision. This basically consists of IMF economists monitoring the performance of three targets between July and September. Argentina has not complied with them but it is assumed that the Fund will approve the money transfer anyway with waivers and other arguments.
What objectives has the country not approved?
Will the money arrive this month?
“Argentina will push for disbursement by the end of the month but it will not be easy for this to happen”, says Marx “There is not only the negotiation but also the period for convening the board of directors in case it is necessary to request exemptions, of which there will be. It will be right. In any case, he stops paying the deadlines. [N.R: la Argentina tiene que pagar US$ 1.950 millones a fin de mes] AND It will be possible to request a bridging loan with other countries”.
For Héctor Torres, former representative of the Fund for Argentina, “the idea is to reach the Board of Directors before the end of the month. What if they arrive? It is the first time that the IMF has negotiated with a government that proposes a more draconian fiscal adjustment than the fund itself would require. I estimate that this will facilitate a sort of “reconstruction” of the program signed by the previous government. It is not the most appropriate solution for a government that has a very different economic program from that of Fernandez, but This is what will allow disbursements to restart in the shortest possible time.”.
Source: Clarin
