IMF ‘to delay’ Argentina’s next loan tranche until after election

IMF prepared to adopt “all possible bureau cratic measures” to “stretch deadlines as much as possible,” according to reports in local and international outlets.

The International Monetary Fund is looking to delay the next disbursement of its US$57-billion credit-line with Argentina until after the October 27 elections, according to reports.

Local and international outlets reported Friday that the Fund’s officials are evaluating how to push the next US$5.4billion tranche back, with one report suggesting that the IMF’s leadership is prepared to adopt “all possible bureaucratic measures to stretch deadlines as much as possible.”

All the reports cited Argentina’s economic and financial volatility as cause for the potential delay, with IMF officials anticipating that President Mauricio Macri will lose his shot at re-election next month.

Clarín journalist Marcelo Bonelli wrote Friday that the IMF’s officials wanted to “negotiate ” thedeal“with whoever wins on [October] 27,” adding that the institution was even prepared to delay the tranche until November’s r un-off, should one be required. The IMF, however, reportedly expects Peronist challenger Alberto Fernández to be elected outright in the vote, without the need for a second round.

The news comes just a day after IMF and government officials confirmed that Finance Minister Hernán Lacunza would travel to Washington at the end of the month, presumably to discuss the next installment of the loan. The meeting is pencilled in for September 24, but Bonelli reported yesterday that regardless of how it goes, the Fund’s officials would still seek to delay any payment, “even if the minister [Lacunza] was excellent in negotiations.”

“The IMF would not announce a postponement of the loan, but would do everything necessary to stretch the deadlines and negotiate with the president-elect,” wrote Bonelli.

The IMF is also going through its own period of change, following the departure of Managing Director Christine Lagarde, who has been named to lead the European Central Bank. Kristalina Georgieva of Bulgaria, currently chief executive officer, is set to become t he institution’s new chief.

Rumours the IMF would seek to delay its next payment also circulated in the international financial press, with the Financial Times reporting that the next payment of the bailout was “at risk of being delayed” beyond October’s election.

Though IMF officials declined comment, sources told the outlet that the next tranche of the US$57-billion credit-line would “take much longer than originally expected because of the difficulty of assessing compliance in a fast-changing situation where the government was announcing new measures on an almost daily basis.”

The Financial Times reported that the IMF was concerned by the loss of reserves from the Central Bank and the Treasury. Since the August 11 PASO primaries – in which Fernández emerged with a huge lead over Macri – the Central bank has lost more than US$15 billion in reserves, the newspaper reported.

Investors and portfoloio managers cited in the article said markets were already pricing in a delay, while a source at the Finance Ministry said the government was not concerned by the delay, describing it as “not an immediate necessity.”

The government has received about US$44 billion so far of the three-year loan approved in June 2018, but soaring inflation and rising poverty stirred outrage at the government’s belt-tightening measures.