Argentina Negotiates Large Upfront Payment in US$20 Billion IMF Deal

Argentina is negotiating an upfront payment from its US$20 billion IMF programme to strengthen reserves. The focus is on the size and timing of disbursements, with previous agreements highlighting challenges in frontloading discussions. Current reserves are at US$26.2 billion, with potential funding to elevate them significantly.

Argentina is currently negotiating with the International Monetary Fund (IMF) to secure a substantial upfront payment as part of its future US$20 billion programme. The primary focus of these negotiations revolves around the size and timing of the disbursements, with discussions highlighting the importance of the initial payment.

While the specific amount Argentina is requesting remains undisclosed and no final decision has been reached, it is evident that the country is seeking to strengthen its international reserves. This frontloaded financing would enable Argentina to utilize some of the funds to repay its debt with the Central Bank through non-transferable notes, allowing for the recapitalization of the Central Bank itself.

The Economy Ministry of Argentina has not commented on the specific amount being sought upfront. Nevertheless, IMF spokeswoman Julie Kozack acknowledged that negotiations about the disbursement size and pace are ongoing.

The market is closely monitoring these discussions since Economy Minister Luis Caputo confirmed the US$20 billion deal, a figure previously reported by Bloomberg News. Additionally, Morgan Stanley projected that Argentina might receive US$5 billion upfront in 2025, supplemented by US$5 billion from other international institutions.

Caputo also indicated that it may take weeks for the IMF’s executive board to approve the new loan and mentioned that combined funding from the IMF and other institutions could bolster Argentina’s Central Bank reserves to nearly US$50 billion, increasing from the current US$26.2 billion.

Previous IMF agreements in 2018 and 2022 have heavily focused on frontloading discussions, with mixed outcomes. In 2018, the IMF provided an accelerated payment, raising the overall programme size to US$57 billion, which ultimately faltered. More recently, Argentina received US$9.8 billion as part of a refinancing deal and secured US$7.5 billion ahead of the 2023 presidential election, albeit amid repeated breaches of programme rules.

Argentina’s negotiations with the IMF are centered on securing a significant upfront payment from its US$20 billion programme, which aims to enhance its international reserves. Discussions about the disbursement schedule are crucial, given the past challenges associated with frontloading in previous agreements. With current reserves at US$26.2 billion, combined funding could propel these reserves closer to US$50 billion, reflecting the urgent need for financial stability.

Original Source: batimes.com.ar