IMF warns Argentina to stick to financial program
2023.02.01 12:23
IMF warns Argentina to stick to financial program
By Tiffany Smith
Budrigannews.com – The International Monetary Fund said on Wednesday that it would prefer Argentina’s government not to undermine the objectives of their multibillion-dollar program after it announced a $1 billion buyback of foreign currency bonds.
“The program does contain targets for reserves. When asked about the buyback’s compatibility with the program’s goal of accumulating foreign reserves, Nigel Chalk, deputy director of the IMF’s Western Hemisphere department, stated, “We would prefer not to have actions that undermine the reserve accumulation that we’re assuming in the program.”
On January 18, Argentina’s bond repurchase program was made public. According to Portfolio Personal Inversiones (PPI), a local brokerage, the government has spent approximately $404 million on market purchases of bonds with a nominal value of more than $1.1 billion.
NYSE: Moody’s S&P Global (NYSE:) deemed it a “distressed exchange” that amounted to a default. As it confirmed its rating on the sovereign, ratings characterized it as “opportunistic” and comparable to a debt restructuring.
In an interview with Reuters, Chalk stated:
“The team has been working with the Argentine authorities on this plan with the debt buyback… first on the scale of it, how it’s being operated, and then how it fits in with the program.”
He went on to say that at the end of December, the program review, which is a regular evaluation that determines whether the next round of cash will be released to the Argentine authorities, will assess whether targets were met.
“But obviously, that review has a forward-looking component, and we want some comfort in the knowledge that reserves will also be met in the future.”
Moody’s and PPI estimates place Argentina’s net FX reserves closer to $6 billion, while Argentina’s central bank estimates that its gross FX reserves as of January 27 total approximately $42.3 billion.
“The net reserve stock closes January at $6.1 billion, according to our estimates, primarily due to $1.05 billion in coupon payments,” the brokerage told Reuters.
At the time it was announced in March 2022, Argentina had the largest active IMF program, an Extended Fund Facility for $44 billion. The majority of the approximately $24 billion that has already been disbursed has been used to repay the fund for a failed 2018 program.
The initial goals of the program call for Argentina to add $4.0 billion to its reserves this year.
