Argentina’s IMF deal falls through: negotiations ongoing

The Central Bank intervened in the financial dollar exchange rate by trading bonds today. The Fund recommended strict limits on this activity in its last review of the country’s deal

Sergio Massa with IMF Managing Director Kristalina Georgieva

Official sources in the Argentine government have told the Herald that they consider the country’s deal with the IMF has fallen through. However, sources within the Economy Ministry said that they do not consider that to be the case, but that it is being renegotiated from the ground up including disbursements and all targets such as international reserve accumulation.

A spokesperson for the IMF also alluded to ongoing renegotiations with the government. 

“The technical staff is continuing to work with the Argentine authorities to strengthen the economic program agreed with the country in the context of a very severe drought,” they told the Herald. “The exchanges between the authorities and the IMF team are advancing in a constructive manner.”

Today, in the midst of a sharp jump in the informal dollar, the Central Bank traded bonds to intervene in the value of financial dollars. The Fund recommended strict limits on this activity in its last review of the country’s deal

“Interventions in the secondary bond market should take place only when critical to ensure normal market functioning, at market prices,” said the IMF staff report of the fourth review. “And with offsetting sterilization measures to mitigate inflation risks.”

Regarding the country’s foreign exchange and monetary policy, the report said that “Central bank intervention in the secondary bond market should be limited to addressing financial stability risks.”

Argentina’s Central Bank (BCRA, by its Spanish acronym) bought US$41 million in the foreign exchange market today and, as a result, the foreign exchange balance for April was US$ 230 million positive.

Agroexporters sold US$61 million of products today. The total accumulated in this third stage of the agro dollar remains at US$1.45 billion.

The agreement that that is now being renegotiated is an Extended Fund Facility agreement signed in 2022 after renegotiating the US$44 billion debt former President Mauricio Macri acquired in 2018. The deal includes an economic program that Argentina must comply with in order to receive disbursements every three months, which are then used to pay for the previous debt with the IMF.

The government missed the first-quarter fiscal deficit target agreed with the IMF by 56% and an economy ministry taskforce was set to travel to Washington D.C. later this week to meet IMF authorities in order to continue negotiations over the redefinition of the agreement.

A drought of historic severity has devastated the harvests of key crops in Argentina such as soybeans and maize, slashing the country’s inflow of dollars and complicating its attempts to accumulate international reserves. Earlier in April, IMF head Kristalina Georgieva explicitly acknowledged the severity of the drought’s impact on Argentina’s economy.

The IMF’s Executive Board approved a modification of international reserve accumulation targets on April 1 but analysts said even the revised goals will be difficult for Argentina to meet.


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