IMF expects $44 billion loan deal with Argentina

In response to Argentina’s financial crisis, the International Monetary Fund said on July 23 that it expects to reach a service-level agreement with Argentina on the country’s $44 billion (about 316.2 billion yuan) loan review with the International Monetary Fund in the next few days.

On July 23, the International Monetary Fund posted on the social platform that: “Argentine Ministry of Economy and Central Bank team and IMF staff have completed the core technical work of loan review. The two parties have reached an agreement on the core objectives and parameters of the service level agreement. It is expected that the agreement will be finalized in the next few days and enter the review stage of the project at the same time.”

In the past year, Argentina experienced a continuous financial crisis, inflation continued to heat up, the currency depreciated sharply, and because the Federal Reserve continued to raise interest rates, the dollar appreciated sharply, and the Argentine peso faced huge depreciation pressure. The Argentine central bank once sold dollars every day to prevent the peso from depreciating. In October this year, Argentina will hold a presidential election. However, hit by the drought, Argentina’s economic crop exports have been hit, and agricultural exports have lost about 20 billion U.S. dollars (about 143.9 billion yuan). The country’s foreign exchange reserves have dropped sharply, further exacerbating Argentina’s trade and debt repayment crisis. The Argentine central bank continued to sell dollars to avoid a sharp depreciation of the peso three months before the presidential election.

During the period from July 31 to August 1, Argentina will face approximately US$3.4 billion (approximately RMB 24.5 billion) in maturing debt from the International Monetary Fund, while the Argentine central bank’s net foreign exchange reserves are approximately US$6.5 billion (approximately RMB 46.8 billion), which has dropped to a critical level.

The lack of reserves in Argentina has exacerbated the country’s financial crisis. To this end, Argentina wanted to change the economic goals previously agreed with the International Monetary Fund and advanced part of the loan provided by the International Monetary Fund. The IMF said the service-level agreement acknowledged the negative impact of the drought on Argentine exports and tax revenues, and was aimed at strengthening Argentina’s “fiscal order and strengthening reserves”. The deal could be signed on July 26 or July 27, according to an Argentine Economy Ministry source.

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