According to four sources, Argentina’s preliminary agreement with the IMF is expected to consolidate evaluations of its $44 billion loan programme, potentially paving the way for streamlining payments to the cash-strapped nation.

The third-largest economy in Latin America has been pushing to advance part of the IMF payouts planned for this year as the nation struggles with a serious financial crisis that could get worse owing to a lack of foreign reserves.

The sources said, asking not to be identified since the discussions are private, that Argentina’s government officials have been attempting to achieve a so-called Staff Level Agreement with the IMF that would cover the country’s progress in respect to the fund’s fifth and sixth evaluations of a 2022 loan. Every review includes three month-time period.  

Argentina would have access to 5.5 billion special drawing rights (SDRs), or almost $7.3 billion, if the two studies were combined. However, it is unclear whether combining the inspections would necessarily result in a single payment, or what the IMF refers to as a rephasing of payments.

The action was taken after the fifth review negotiations were postponed due to disagreements over some economic measures required to keep up IMF payouts. To protect reserves, these included the addition of additional peso exchange rates.

There were no comments on the issue from the spokesperson for the Economy minister.

An IMF spokesperson said: “Discussions between the teams continue to be very constructive” and “are aimed at reaching staff level agreement.”

Once a Staff Level Agreement has been achieved, it is forwarded to the IMF executive board for approval, which causes the cash to be released.

The completion of Argentina’s fifth review, which was associated with a $4 billion payment, was scheduled for June, but negotiations on an agreement were postponed because of IMF “prior action” demands on Buenos Aires, one of the sources said, without elaborating.

Prior actions are steps that a country must take before the Fund approves a change to a programme or a loan programme.

The sixth evaluation, which is associated with a $3.3 billion payout, was initially scheduled for September, but it can now be moved up because the necessary second-quarter data is already available.

The Fund has combined assessments with other programmes in the past. The Fund aggregated ratings for Uganda and Nepal earlier this year, as well as reviews for Pakistan from a year ago.

A Staff Level Agreement has lately been described as being close by both parties.

For Argentina, timing is challenging. The final approval and disbursements would come later next month because the IMF board won’t be able to meet before the summer break in the first half of August, according to two sources.

The nation urgently needs to secure funding to pay back the $3.4 billion it owes the IMF on a loan from 2018 that is due soon.

It must make payments of $2.6 billion on July 31 and over $800 million on August 1 to avoid a default with the multilateral lender.

Buenos Aires might need to employ a swap line with Beijing because it has no liquid currency reserves. Argentina completed its June payment to the IMF using Yuan worth $1.1 billion from a recently expanded and extended exchange line with China’s central bank.

Argentina’s IMF programme is due for four reviews between December 2023 and September 2024 as a result of its double-digit inflation rate and recession.

(Adapted from Reuters.com)

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