Argentina’s new IMF deal staves off default fears By Reuters

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© Reuters. FILE PHOTO: A general view shows a protest against the government’s agreement with the International Monetary Fund (IMF), in Buenos Aires, Argentina February 8, 2022. REUTERS/Miguel Lo Bianco/File Photo

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By Walter Bianchi

BUENOS AIRES (Reuters) – Argentina has reached a staff-level deal with the International Monetary Fund (IMF) for a $45 billion program, which will push back payments on looming debt while tying the country to a program economic agreed.

This agreement still needs to be approved by the Argentine Congress and the IMF’s board of directors.

WHY DID ARGENTINA NEED THIS AGREEMENT?

Argentina, which has benefited from 22 huge IMF bailouts, agreed to a record $57 billion program in 2018 under President Mauricio Macri. This agreement failed to avert the economic crisis and the country sank into recession with high inflation.

Unable to service its debts, the country reorganized more than $100 billion in bonds with private creditors in 2020 before turning its attention to the more than $40 billion outstanding at the IMF.

The country faces some $17.5 billion in payments this year under the 2018 deal that it cannot pay.

“The deal was necessary so as not to default with the IMF,” said economist Roberto Geretto of Fundcorp.

WHAT IS THE NEW TIMETABLE?

Once fully approved by Congress and the IMF’s Executive Board, the fund is expected to disburse $45 billion over a 2.5-year period, much of which will be used to repay debt from the 2018 program. payment will come after a review.

These IMF payments would be highly concentrated, with more than three-quarters of them to be disbursed in the first six installments out of a total of 11 planned disbursements, according to the government’s letter of intent to the lender.

Argentina will have to start making repayments from 2026, which should be completed by 2034.

“This allows to extend the time for the country to carry out reforms, normalize its situation and be able to return to international capital markets,” said Eugenio Marí, economist at Fundación Libertad y Progreso.

WHAT’S IN THE ECONOMIC PROGRAM?

The agreement is accompanied by an economic program which includes objectives to achieve a primary budgetary balance by 2025, to control inflation currently at an annual rate of more than 50% and to reduce the financing of the Treasury by the central bank.

Argentina will also have to cut 0.6% of GDP from the huge energy subsidies the government uses to cut bills. These subsidies amounted to approximately $11 billion last year.

The program, whose progress will be reviewed on a quarterly basis, will also include targets to deliver positive real interest rates, strengthen foreign reserve levels and boost net exports.

Argentina: budget deficit https://tmsnrt.rs/33TUSsr

Argentina: budget deficit (Interactive version) https://tmsnrt.rs/33S7dNO

Argentina: economic targets (interactive version) https://tmsnrt.rs/3vEuNc1

Argentina: economic objectives https://tmsnrt.rs/3sG3w77

Argentina: IMF disbursements https://tmsnrt.rs/3pCpy90

Argentina: IMF disbursements (interactive version) https://tmsnrt.rs/3MqNshG

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