GOVERNMENT USES SDRS TO MAKE US$1.9-BILLION DEBT PAYMENT TO IMF

The government transferred the International Monetary Fund US$1.88 billion on Wednesday, complying with the first principal payment of Argentina’s record bailout.

The amount due stems from the record Us$57-billion loan given by the Fund in 2018 to Argentina’s previous government in a failed attempt to stabilise the crisis-prone economy. The country has to date received US$44 billion of the credit line agreed by former president Mauricio Macri. Upon taking office in December 2019, President Alberto Fernández refused to accept the remaining tranches.

Argentina’s Central Bank paid the maturity with special drawing rights (SDRS) received by the country last month, two sources told Bloomberg.

The Fund issued the extra funds to help countries tame the impact of the pandemic, with Argentina receiving about US$4.3 billion.

The government’s commitment to repaying the IMF is under added scrutiny after Fernández’s Frente de Todos coalition lost heavily in the September 12 PASO primaries, exposing a deep divide with Vice-president Cristina Fernández de Kirchner and her more radical wing.

Argentina, which holds decisive midterm elections on November 14, has paid the IMF US$950 million in interest. It must make another interest payment of US$400 million by November, as well as pay another US$1.9 billion toward the debt by December.

With the country locked out of international debt markets, reaching an agreement with the Fund to reschedule next payments will be crucial in order to avoid US$19 billion in maturities next year. An additional US$19 billion is due in 2023, followed by US$4.9 billion in 2024.

While Fernández has said the country’s 2022 Budget bill assumes a deal will be reached, the need to recover political ground is likely to lead to more government spending, challenging any possible fiscal commitments.

Argentina, the IMF’S biggest debtor, has been in recession since 2018. It hopes to agree an Extended Fund Facility (EFF) programme with the Fund in order to delay and extend its repayment terms. In June, the country reached an agreement with the Paris Club of creditor nations to avoid defaulting on loan repayments, unlocking temporary relief of some US$2 billion.