Wall Street foresees that Argentina may obtain up to US$20 billion from the IMF to support President Javier Milei’s austerity efforts. Key banks predict disbursements for 2025 could be between US$5 billion and US$10 billion. The IMF negotiations are progressing, with anticipation for Argentina to stabilize its economy and return to international capital markets.
Wall Street anticipates that the International Monetary Fund (IMF) may extend up to US$20 billion to Argentina as part of a crucial new program that supports President Javier Milei’s austerity initiatives. Major banks such as UBS Group AG, Morgan Stanley, and Bank of America Corp. predict disbursements for 2025 could range from US$5 billion to US$10 billion. Moreover, Argentina is not expected to commence principal repayments on its previous IMF loan until next year, potentially bolstering the Central Bank’s reserves, which could facilitate the easing of currency and capital controls.
Investors are scrutinizing the Milei administration’s plans for utilizing the funds and the anticipated timeline for dismantling existing financial controls. President Milei has indicated that IMF resources would be allocated to reducing the treasury’s debt with the central bank to rectify the monetary authority’s balance sheet. This approach has raised hopes among market analysts for significant positive developments regarding the loan’s amount and disbursement schedule.
Alejo Czerwonko, Chief Investment Officer for Americas Emerging Markets at UBS, remarked that there is “potential for positive surprises in the deal’s magnitude and timing of disbursements.” He projected that the arrangement might encompass up to US$20 billion, with as much as US$8 billion in new funds to service both principal and interest payments to the IMF throughout Milei’s tenure.
Negotiations between the Milei administration and the IMF appear to be advancing rapidly, following the President’s recent address to Congress regarding the impending support for the new program without divulging specific details. This would represent Argentina’s third IMF program since 2018, as the earlier agreements failed to restore economic stability.
Despite being one of the weaker performers in emerging markets this year, Argentina’s sovereign bonds experienced an uptick following Milei’s congressional speech. Indicative pricing data indicates that benchmark bonds due in 2035 were trading around 65 cents on the dollar.
Bank of America strategists, including Lucas Martín, have contended that money managers might be “underpricing the possibility that Argentina agrees to additional fiscal consolidation” as part of the new IMF agreement. Given that the country’s US$44 billion aid package is set to expire at the end of 2024 and that repayments to the IMF are not scheduled to begin until September 2026, the Milei administration aims to finalize the new agreement this year.
In December, the IMF confirmed that discussions for a new loan were in progress after President Milei decided not to complete the final assessments of the prior deal left by his predecessor. A new program would bring the administration closer to reentering international capital markets, following Argentina’s controversial sovereign debt defaults in 2020.
In summary, Wall Street anticipates that Argentina could secure a substantial IMF loan of up to US$20 billion, which would support President Javier Milei’s economic reforms. With no initial principal repayments required, these funds may enhance the Central Bank’s reserves and aid in reducing treasury debt. Increased scrutiny from investors over the administration’s fiscal strategies is expected, as the country seeks to navigate its financial obligations and return to international markets following past defaults.
Original Source: www.batimes.com.ar
