The Joe Biden administration would support speeding up disbursements from Argentina’s US$44.5-billion programme with the International Monetary Fund, if the nation’s authorities can successfully negotiate a new schedule with the lender, according to US officials familiar with the matter.
Based on the current programme, Argentina is scheduled to receive US$10.6 billion from the IMF between June and December. Yet the nation, pressured by dwindling reserves, out-of-control inflation and a record drought, is seeking to advance some or all of that financing from the IMF to June.
The United States would be supportive of frontloading the payments because it sees the need to prevent Argentina’s economic crisis from getting worse, the officials said, asking not to be identified without permission to speak publicly.
Argentina’s government plans to make the case to the IMF that the severe drought the country is suffering is beyond its control, and it needs the funds as soon as possible to tame the crisis.
US support is important, given its status as the IMF’s largest shareholder, and the Fund’s desire to take decisions by consensus.
But negotiating a front-loading of the loan with IMF staff will be no easy task for Argentina. The Fund is likely to ask for conditions that could be difficult for the country to meet, and Argentina has a long history of failing to meet the goals set out for it by the IMF.
One other US official cautioned that the US would need to review any staff agreement and consult with IMF leadership and other board members before taking an official position.
The US Treasury Department, National Security Council and Argentina’s Economy Ministry declined to comment.
An IMF spokeswoman said that the Fund continues to work very closely with Argentine authorities to strengthen the country’s programme in the context of the drought, and that discussions about the next review are ongoing and continue in a constructive way.
Argentina is the IMF’s largest borrower and it has a complicated history with the Fund after 22 different programmes in close to 70 years did little to fix a crisis-prone economy.
The current programme is already off-track with the government likely missing key targets through the end of March while annual inflation reached 104 percent and the peso plunged in parallel markets. Those setbacks forced policy-makers to go back to the drawing board to overhaul the loan.
Argentina also faces a volatile presidential election this year and accepting a looser financial programme could be seen by the opposition as favouring the government ahead of the October vote.
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Although unusual for its standards, the IMF has front-loaded cash to Argentina before. In 2018, the IMF approved advancing disbursements to the government of former president Mauricio Macri as the economy nosedived into a currency crisis triggered by another significant drought. However, more cash up front didn’t stabilise the economy and the programme was suspended around the presidential election of 2019.
To make things more complicated, Argentina’s Vice-President Cristina Fernández de Kirchner, who over the years has repeatedly criticised the IMF, last week blamed the existing programme for the country’s economic malaise, complaining that the Fund’s rules prevented the Central Bank from intervening to stem the decline of the peso.
Argentina’s economy faces one of its severest moments with the drought sending activity into recession and international reserves slumping even after the Fund disbursed US$5.4 billion in fresh funding at the start of April, bringing disbursements under the extended fund facility deal to US$28.9 billion.