Argentina’s government is formalizing a decree to secure a new IMF program, essential for financial support and lifting capital controls. President Milei has instituted austerity measures, yet needs further resources due to substantial debt and negative central bank reserves. The planned extended fund facility could range from $5 billion to $20 billion, vital for maintaining economic recovery ahead of upcoming elections.
Argentina’s government is actively working to establish a new program with the International Monetary Fund (IMF) by publishing a decree of necessity and urgency in the official gazette. This initiative may provide vital financial support necessary for fulfilling its debt obligations and ultimately lifting capital controls. Under the leadership of President Javier Milei, Argentina has implemented significant austerity measures to reduce fiscal deficits and combat triple-digit inflation, but additional financial resources are essential for sustaining these reforms amidst negative central bank reserves and looming debt repayments.
The decree, published on March 11, underscores the need for urgent reduction of a substantial portion of the National State’s debt to the central bank (BCRA) in order to enhance its financial standing and liquidity of international reserves. The proposed extended fund facility (EFF) would feature a repayment period of ten years, with a grace period of 4.5 years, and the decree suggests that these new funds are intended for settling Treasury debts with the BCRA, without specifying the amount.
Financial institutions like UBS Group AG, Morgan Stanley, and Bank of America Corp. have estimated the potential loan to be between $5 billion and $20 billion. Reports indicate that Milei has urged lawmakers to endorse the IMF loan agreement; this decree is a critical aspect of the libertarian president’s strategy to navigate the IMF deal through Congress, suggesting that an agreement may soon be reached.
Argentina’s outstanding IMF debt is approximately $44.5 billion, originating from a Stand-By Arrangement made in 2018 during a time of significant capital outflows and peso depreciation. An Extended Fund Facility (EFF) agreement was reached in 2022, which concluded in September of the previous year. Recently, Milei expressed that the ongoing negotiations for a new IMF agreement aim to stabilize the central bank and eradicate inflation.
In an op-ed for La Nacion, Milei explained the forthcoming deal’s intention to aid in clearing the BCRA debts as a foundational step in addressing the ongoing inflation challenges in the country. “The money received from the IMF will be used by the treasury to cancel part of its debt with the central bank,” he stated. This impending agreement is particularly crucial as mid-term legislative elections approach, and Milei’s political future and the viability of his economic strategy may greatly depend on the successful acquisition of IMF backing.
In summary, Argentina’s government is making strides to formalize a new agreement with the IMF, which may provide essential financial support in managing debt and combating inflation. The decree is part of President Milei’s broader economic strategy and reflects urgency due to upcoming elections. Successful negotiations with the IMF are pivotal not only for economic stability but also for supporting Milei’s political agenda.
Original Source: www.bne.eu
