IMF sees US$45-billion deal with Argentina pushed into 2022

The International Monetary Fund privately estimates that a deal allowing Argentina to reschedule payments on US$45 billion owed to the lender will be pushed into 2022 as President Alberto Fernández has little incentive to quickly agree on the basis of a new programme.

While the IMF has said it’s constructively engaging with Fernández’s administration, negotiations entailing fiscal austerity aren’t expected to make much progress before Argentina’s midterm elections in November, said five people familiar with the talks, asking not to be identified because discussions are private.

Pressure on Argentina for a faster deal has also eased as the government will likely have enough money to cover US$4.58 billion in principal and interest payments due to the Fund later this year. It expects to receive US$4.4 billion in IMF reserves in August, as part of a global injection of funds to fight the economic impact of the pandemic, and has also seen larger-than-expected dollar revenue due to rising prices of soybeans, a top export product.

More crucially, Argentina and the IMF haven’t so far agreed on economic projections that will be the basis for a new programme, according to two of the people, one of whom called the estimates provided by the country overly optimistic.

The Economy Ministry declined to comment. The IMF said it had no additional comments beyond those made by its spokesman Gerry Rice on June 10, when he said the Fund is working on a programme to address Argentina’s deep social and economic challenges, without offering a prediction on timing.

Paris Club

Calls are growing louder for Fernández to put forward a credible economic plan as his government also seeks to restructure debts with the Paris Club. Argentina didn’t make a US$2.4-billion payment due in May to the club of rich countries, and both sides continue negotiating during a 60-day grace period. Next year, Argentina owes US$18 billion in principal to the IMF, an amount the president says the government can’t pay.

US Deputy Treasury Secretary Wally Adeyemo spoke to Economy Minister Martín Guzmán this week on the IMF and Paris Club discussions, saying the United States would support a “strong economic policy framework for Argentina that provides a vision for private sector job growth.” Any agreement at the IMF requires US support since it has the largest share of votes.

Argentina began talks last year with the IMF for a revamped programme to reschedule payments stemming from a record deal granted to the previous, pro-business government of Mauricio Macri. Guzmán initially aimed to close a deal by May.

As talks are expected to heat up after the election, the IMF will also be changing one senior official in Buenos Aires. As part of a routine rotation of senior staff, Ben Kelmanson, currently the Fund’s representative in Turkey, will replace Trevor Alleyne, whose term in Argentina ends this year, a Fund spokesman said.