Agreement with the IMF finally in sight?

ARGENTINA - In Brief 27 Jan 2022 by Esteban Fernández Medrano

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At the close of yesterday’s newspapers, the local press announced that Argentina had reached an agreement with the IMF and that it would be officially announced later today, Friday, Jan 28. Even though we would prefer to read the actual agreement to give a more reasoned opinion, if confirmed, this news would still be positive for Argentina’s debt and FX market conditions, in particular because the market started, over the last weeks, to price in the risk of no agreement at all. And this agreement would be coming in "just in time", as today the government must also pay the IMF close to USD 710mn for capital amortization of the 2018 Standby Agreement. And next Tuesday, another USD 360mn comes due because of interest payments. The table below shows the current payment obligations with the IMF for this year, adjusted at actual FX rates. The concern that has kept the market in suspense was whether the government was going to honor the almost USD 1.08bn of debt payment obligations with the international organization, in less than a week. Argentina already used up, to pay the IMF, close to USD 4.1bn of the USD 4.35bn received last August from the international organization, as part of their global SDR disbursements program to mitigate the negative impact of COVID. This means close to USD 750mn would have to be paid with “genuine” FX reserves at the BCRA. Due to the low level of net reserves, the time to negotiate an agreement was running out.