The tone is calm, solemn. “I want to bring tranquility, Argentina is not going to use a single dollar from its reserves to pay its deadline today”, assures the country’s economy minister, Sergio Massa (center-left), Monday, July 31, the left index finger in the air emphasizing his message. Surprising remarks, when that day Buenos Aires must honor the payment of 2.7 billion dollars (2.4 billion euros) to the International Monetary Fund (IMF). In dire straits, with its reserves totally dry, the country finally found an acrobatic formula to meet the deadline without spending its precious greenbacks: a bridge loan of 1 billion dollars from the Inter-American Development Bank and a amount in yuan equivalent to 1.7 billion dollars, included in a currency exchange with China.
The Chinese currency was used for the second time, and this in the space of a month, in order to honor a payment to the Fund. The sign that China is posing as a lender of last resort, building its financial influence. A few days later, Friday August 4, Argentina caused a surprise: the payment of nearly 800 million dollars in interest will be made by a loan from Qatar. A first. The payments are always more acrobatic, shedding light on a haggard economy and a country plunged into uncertainty, in constant negotiation with the institution based in Washington.
These payments are part of the $ 45 billion loan contracted in 2018 with the IMF, subject to renegotiation in March 2022, due to Argentina’s lack of solvency. Although the deadlines have been postponed to 2026, the agreement is in fact based on the following strange mechanism: while awaiting the final repayment of the loan, the IMF makes advances (subject to interest) to Argentina, which are used to honor the installments paid to… IMF. These advances are conditional on compliance with economic objectives revised each quarter.
“A much less flexible IMF than last year”
Also, on July 28, an agreement was announced – it must be submitted for the approval of the IMF’s board of directors – in order to allow an advance of 7.5 billion dollars to Argentina. The agreement paves the way for the revision of the objectives. “Especially since if, in 2022, Argentina was generally able to meet its objectives, this is no longer the case this year, particularly in terms of foreign exchange reserves and the primary deficit. [hors intérêts de la dette] », underlines Santiago Manoukian, economist within the cabinet Ecolatina. However, even modified “The objectives remain difficult to meet. This year we observe a much less flexible IMF than last year”, continues the economist. The accumulation of reserves is thus set at 1 billion dollars by the end of the year (compared to 8 billion during the previous revision). A new horizon that would seem reasonable if the Central Bank did not present negative net reserves of 8 billion dollars, according to private firms, the institution not communicating its net reserves.
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