The International Monetary Fund has stressed its view on how Argentina will manage a 44-billion-dollar loan program that has been derailed ahead of the country’s key presidential election later in November.
The IMF’s Board of executive directors met at a previously unannounced meeting on October 30 for an informal briefing on Argentina by the fund’s staff, as the South American country struggles with triple-digit inflation and net reserves in the red in the run-up to the presidential vote.
One of the sources, who asked not to be named because the talks are private, said concerns were raised during the meeting about how quickly the country has been consuming international reserves since the last review of the program in August.
The source added that the wording used during the briefing also reflected a tougher stance, with board members talking about the “mismanagement” of the program by the Argentine government, rather than terms such as “policy slips” or “poor performance” previously used.
A second source added that with the “depletion of reserves and an overvalued currency, recent economic measures are not in line with the program”.
The Central Bank of Argentina intervened in the parallel foreign exchange market for “a significant amount of 2.7 billion dollars in the last three months as foreign exchange pressures increased amid the election cycle,” according to a JPMorgan note. The bank added that the net negative foreign currency reserves amount to 15.3 billion dollars, according to Reuters.
IMF funding has been crucial to keeping the Argentine government’s public finances afloat, and the fund has given the agricultural exporter suffering from a historic drought some breathing space to meet its obligations in recent months.
In an August report, the IMF said Argentina’s program had been derailed, but allowed changes in some targets-such as loosening Reserve targets-to get the program back on track.
The tougher stance by the IMF reflects the view that, despite the concessions, the program is moving further off course-which could jeopardize future payments.
It also comes at a sensitive time for the cash-strapped country, whose program review is scheduled for early November. The review is an essential step that the state needs to reach a staff – level agreement that – once signed by the fund’s executive board-will trigger the next tranche of funding.
