Wall Street Anticipates Up to $20 Billion IMF Loan for Argentina
Wall Street foresees Argentina obtaining up to US$20 billion from the IMF, supporting President Milei’s austerity plan. Preparations for the loan, which could involve US$5 to US$10 billion for 2025, are nearing completion. Investors seek clarity on fund utilization and control dismantling, as Argentina aims for fiscal consolidation.
Wall Street anticipates that the International Monetary Fund (IMF) will extend a loan to Argentina amounting up to US$20 billion, a move that would significantly bolster President Javier Milei’s austerity initiatives. Financial institutions such as UBS Group AG, Morgan Stanley, and Bank of America Corporation predict that disbursements could range between US$5 billion to US$10 billion for the year 2025. Notably, Argentina’s previous loan agreement allows the nation to delay principal repayments until next year, potentially increasing the Central Bank’s reserves to facilitate lifting currency and capital controls.
Investors are vigilantly monitoring how President Milei’s administration plans to utilize the funds, particularly regarding the dismantling of existing financial controls. The libertarian president has disclosed intentions to allocate IMF proceeds to reduce the debt owed by the Argentine treasury to the central bank, aiming to rectify the balance sheet of the monetary authority.
Alejo Czerwonko, chief investment officer for Americas emerging markets at UBS, remarked, “There is potential for positive surprises in the deal’s magnitude and timing of disbursements.” He suggested the potential for up to US$20 billion in total funding, which would include US$8 billion designated for covering principal and interest payments to the IMF throughout Milei’s term.
The negotiations between Milei’s administration and the IMF appear to be approaching completion, as the president addressed Congress stating his intent to seek support for the upcoming programme imminently, albeit without disclosing details. This programme would represent Argentina’s third IMF agreement since 2018, as preceding efforts failed to stabilize the economy.
Despite being one of the poorer performers among emerging markets this year, Argentina’s sovereign bonds showed improvement following Milei’s address to Congress. Benchmark bonds due in 2035 are reportedly trading around 65 cents on the dollar, according to Bloomberg’s pricing data.
Bank of America analysts, including Lucas Martín, indicate that investors might be “underpricing the possibility that Argentina agrees to additional fiscal consolidation” as part of the IMF agreement. The country’s prior US$44-billion aid programme concluded at the end of 2024, and principal repayments to the IMF are deferred until September 2026, prompting the Milei administration to expedite negotiations for a new deal this year.
The IMF had confirmed in December that discussions for a new loan were in progress after President Milei opted out of completing the final reviews of the deal left by his predecessor. Securing a new agreement would move the president closer to reintegrating Argentina into international capital markets, following a default on sovereign debt in 2020, marking the ninth such failure in the nation’s history.
In summary, Wall Street projects that Argentina could secure a US$20 billion loan from the IMF, a pivotal step for President Milei’s austerity programme. Investor focus remains on the effective strategic deployment of these funds and the prospective removal of financial controls. As Argentina approaches the final phases of negotiations with the IMF, the new agreement could revive the nation’s access to international funding after previously defaulting on its debts.
Original Source: www.batimes.com.ar
