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UBS economists provided insights into the evolving financial relationship between Argentina and the International Monetary Fund (IMF), highlighting recent developments that indicate Argentina is nearing an agreement with the IMF.
Positive remarks from officials on both sides have been reported, with Argentine President Javier Milei having met IMF Director Kristalina Georgieva in Washington D.C. a few days prior, marking their fifth meeting. Georgieva expressed optimism about Argentina’s stabilization plans, suggesting a constructive dialogue.
Economy Minister Caputo conveyed that while the economic terms of the potential deal are settled, negotiations continue over the package’s size, which will be "sufficient to recapitalize" the central bank. Caputo also expects an agreement by April, with the Argentine Congress likely to approve it.
Should Congress reject the deal, it could still proceed by decree. Securing fresh funds from the IMF is deemed crucial for Argentina to repay its substantial debt over the coming years and to bolster central bank reserves. This financial support is seen as a key step towards a possible easing of capital controls later in the year.
In 2022, Argentina received a $44 billion Extended Fund Facility loan from the IMF, having drawn $41 billion of it. The principal repayments are due between 2026 and 2034. During President Milei’s term, which ends in 2028, Argentina is expected to make approximately $12 billion in principal payments and $9 billion in interest on this loan.
UBS analysts forecast that the IMF will provide funds exceeding these principal payments, suggesting a program of at least $12 billion. Any amount above this would imply additional new funds, with a potential for the deal to reach up to $20 billion, including $8 billion in new funds.
UBS’s optimism is partly based on the IMF’s approval of Argentina’s fiscal consolidation and supply-side reforms. Argentine officials are also expected to address foreign exchange policy disagreements and present a roadmap for lifting capital controls, transitioning to a more flexible exchange rate.
Additionally, President Milei’s strong relationship with former U.S. President Donald Trump could be beneficial, considering the U.S.’s significant influence over IMF lending decisions.
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