Argentina to get $9.8 billion from IMF after agreement approval

Bloomberg

Argentina’s government published the detailed plan for reducing its fiscal deficit and central bank financing as part of its pending $45 billion deal with the International Monetary Fund.
The agreement with IMF staff has now been submitted to Argentina’s congress and will go before a vote sometime in the coming weeks. The country will receive 7 billion ($9.8 billion) of the IMF’s special drawing rights upon approval by lawmakers and the executive board of the Washington-based organization, according to the document.
The memorandum, which comes after two years of negotiations between President Alberto Fernandez’s economic team and IMF officials, provides the fine-print detail on economic policy and projections that lawmakers have been waiting for before deciding on their vote. Russia’s invasion of Ukraine is increasing uncertainty around the plan’s baseline assumptions and may force policies to be “recalibrated” as necessary, it said.
Argentina is seeking to close its 22nd program with the IMF since 1958 before a key payment for about $2.8 billion comes due in late March. The agreement is expected to face tough criticism from radical-left members of the ruling coalition backed by vice-president Cristina Fernandez de Kirchner and would only head to the IMF’s board for final approval if congress passes it.
Argentina’s $16 billion in bonds due in 2030 slipped 0.7 cent to around 31 cents on the dollar, while securities maturing in 2046 slid about a cent to 28 cents on the dollar, as of 12:30pm in New York.
Some key points in the documents:
Disbursements
If the agreement is passed by congress and the IMF executive board, Argentina would receive 7 billion ($9.8 billion) of the IMF’s special drawing rights upon approval. It would receive smaller amounts if it passes the quarterly revisions of the by IMF staff, increasing the total of the program to $45 billion.
Monetary Policy
The central bank aims to boost its foreign reserves by at least $5.8 billion this year and to gradually eliminate money printing to finance government spending, curbing it to zero by 2024. The central bank’s dwindling reserves have been a key investor concern, while economists warned that large-scale money printing fueled higher inflation.
Argentina’s central bank, which raised its benchmark rate twice in 2022 ahead of the agreement, will also look to have real monetary policy rates.
The memo says it plans to simplify its existing reserve requirements system — banks’ money held by the central bank to back deposits — for smaller entities as part of a goal to boost the transmission of its monetary policy. Argentina will also consider consider gradually easing the floor on deposit rates and the ceiling on lending rates for commercial banks.