Argentina and the International Monetary Fund are planning to announce a deal by the end of the week to unlock funds needed to repay $2.6 billion in loans, according to people familiar with the situation, a move that would reassure investors of the lender’s continued support for the struggling economy.
(Bloomberg) — Argentina and the International Monetary Fund are planning to announce a deal by the end of the week to unlock funds needed to repay $2.6 billion in loans, according to people familiar with the situation, a move that would reassure investors of the lender’s continued support for the struggling economy.
IMF Managing Director Kristalina Georgieva has been involved in last-minute discussions with the Argentine government, and an announcement could come as soon as Thursday night, said the people, who asked not to be identified as the discussions are private.
The deal would unlock the next installment of a broader $44 billion loan, the IMF’s biggest, before a July 31 deadline to repay part of an earlier loan from the fund — a situation that underscores the dire state of Argentina’s economy.
An agreement has been elusive. Economy Minister Sergio Massa, who’s running for president, said late last month that an agreement was “hours” away. Officials in his ministry said a deal was expected last week. The IMF said on Sunday that it would be done this week.
The staff-level deal, which would still need approval by the IMF’s executive board, has been delayed by the pace of discussions between the fund and the government, as well as divisions within the fund about what reforms Argentina would need to implement, said the people.
“Discussions between the teams continue to be very constructive, building on the agreement on core policy aspects announced last weekend, and are aimed at reaching staff level agreement,” the IMF said in an emailed request for comment. Argentina’s economy ministry declined to comment.
After rallying earlier this week to their highest level in nearly six months in anticipation to the deal announcement, Argentine bonds due 2030 erased those gains and were flat for the week.
The country was able to make a similar payment last month using IMF special drawing rights and Chinese yuan available through a currency swap line with Beijing.
A new IMF disbursement would provide South America’s second-largest economy with much-needed breathing room as it heads into a presidential election, with primaries starting next month, amid deepening economic and currency crises. Negotiations over the future IMF disbursements would then be taken up by the new government.
While a staff agreement by the deadline wouldn’t immediately unlock the funds to make the payment on time — board approval likely would take a couple of weeks, and it has an upcoming recess in early August — it would at least provide comfort to investors that the payment will be made soon under what could be considered “short-term arrears.”
–With assistance from Vivianne Rodrigues.
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