Argentina clinches $50B IMF deal
buenos aires — Argentina and the International Monetary Fund said on Thursday they reached an agreement for a three-year, $50 billion standby lending arrangement, which the government said it sought to provide a safety net and avoid the frequent crises of the country’s past.
Argentina requested IMF assistance on May 8 after its peso currency weakened sharply in an investor exodus from emerging markets. As part of the deal, which is subject to IMF board approval, the government pledged to speed up plans to reduce the fiscal deficit even as authorities now foresee lower growth and higher inflation in the coming years.
The deal marks a turning point for Argentina, which for years shunned the IMF after a devastating 2001-2002 economic crisis that many Argentines blamed on IMF-imposed austerity measures. President Mauricio Macri’s turn to the lender has led to protests in the country.
“There is no magic, the IMF can help but Argentines need to resolve our own problems,” Treasury Minister Nicolas Dujovne said at a news conference.
Dujovne said he expected the IMF’s board to approve the deal during a June 20 meeting. After that, he said he expects an immediate disbursement of 30 per cent of the funding, or about $15 billion.
Argentina will seek to reduce its fiscal deficit to 1.3 per cent of gross domestic product in 2019, down from 2.2 per cent previously, Dujovne said. The deal calls for fiscal balance in 2020 and a fiscal surplus of 0.5 per cent of GDP in 2020.
“This measure will ultimately lessen the government financing needs, put public debt on a downward trajectory, and as President Macri has stated, relieve a burden from Argentina’s back,” IMF Managing Director Christine Lagarde said in a statement.
Speaking alongside central bank governor Federico Sturzenegger, Dujovne noted that the agreement was well above Argentina’s IMF quota. A minimum $20 billion had been expected based on Argentina’s quota.
The interest rate will be from 1.96-4.96 per cent, depending on how much Argentina uses. The South American country must pay back each disbursement in eight quarterly installments, with a threeyear grace period.