IMF expects China to reschedule billions in Argentina’s debt

The International Monetary Fund expects China to reschedule payments on part of the US$18-billion swap line that it has extended to Argentina, a key step that frees up cash amid President Javier Milei’s deep budget cuts and helps sustain the fund’s massive fiscal support programme for the country.

Argentina owes the People’s Bank of China about US$2.9 billion this month and US$1.9 billion in July, according to Central Bank data released last month.

An agreement between Argentine authorities and IMF staff last month on the latest review of the country’s programme included a firm commitment to refinance or roll over the debt, which was drawn down from an existing US$18-billion swap line between Beijing and Buenos Aires, according to people familiar with the deal, who asked not to be identified as the information isn’t public.

The rollover commitment clears a major obstacle for Argentina’s US$44-billion IMF programme, as the government must show it has so-called financing assurances to manage its enormous debt pile.

The details of the rollover or any refinancing weren’t immediately available. One of the people suggested Argentina could repay some of the debt while rolling over the majority of it. 

The IMF declined to comment. Argentina’s Central Bank did not immediately respond to a request for comment on Tuesday. China’s embassy in Washington also did not immediately respond.

The Washington-based lender’s executive board is scheduled to vote on the agreement Thursday, Economy Minister Luis Caputo said Tuesday. The IMF will publish the staff-level agreement after the vote. 

Caputo said in April that Argentina is starting talks for a new IMF financing programme that could involve fresh funds, adding that Milei’s monetary and foreign exchange plans are part of the discussion.

Former president Alberto Fernández’s government last year used some of the money from China to pay off part of its loan from the IMF, something that no fund member has done in its 80-year history. It also used the Chinese funds to finance imports as it ran low on dollars.

China’s swap is the largest source of foreign gross reserves in Argentina’s Central Bank, whose debts are currently larger than its assets. It’s also the biggest yuan swap line in the world.

On the campaign trail last year, Milei raised questions about the future of Argentina’s relations with China if elected, calling the Chinese “assassins” and “Communists.” 

But in an April interview with Bloomberg News, the president adopted a much more pragmatic tone, avoiding incendiary remarks and assuring he wouldn’t touch the currency swaps.