The International Monetary Fund expects to conclude a review of its $44 billion financing program to Argentina in the coming days, potentially giving the South American nation a lifeline to keep its economy afloat until a new president takes office in December.
The IMF said on Sunday it had reached “understandings” on goals and parameters underlying a staff-level agreement that will eventually be submitted to its board for approval. It added that the core technical work of the review has been concluded by its staff, as well as teams from Argentina’s Economy Ministry and central bank, which have been in Washington since last week.
Time is running out for Argentina to repay previous debts owed to the Washington-based lender after a record drought cost the country $20 billion of agricultural exports. The government’s foreign reserves have fallen to critical levels, partly because the central bank has been selling dollars to avoid a major devaluation of the peso three months before the presidential election.
“The agreement seeks to enhance fiscal sustainability and rebuild reserves, while recognizing the strong impact of the drought, the damage to exports and the country’s fiscal income,” the IMF said in a statement.
Argentine sovereign bonds due in 2030 have climbed in recent weeks to around 34 cents on the dollar on expectations the nation would rework its IMF agreement and on bets voters will install a more market-friendly administration in the October election.
Read More: Peso Devaluation Would Damage Argentina, President Says
Investors see a peso devaluation as all but inevitable. The currency has tumbled 34% this year, the worst performance among emerging markets. The official exchange rate was at 269 pesos per dollar as of Friday — in the black market, the peso trades closer to 500 per dollar.
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The newest version of the program refinances payments from a record 2018 bailout. Argentina has struggled to meet the terms as annualized inflation soared to more than 100% and the economy slowed.
Talks have dragged on for months as Economy Minister Sergio Massa, Argentina’s chief negotiator, emerged as the ruling coalition’s top presidential candidate, pushing the deal further into the political spotlight.
Read More: Massa’s Argentina Election Bid Puts IMF Staff in a Bind
Argentina owes the IMF $2.6 billion before July 31 and it’s not clear how it’ll make payment. In June, the government took the extraordinary step of paying part of an IMF maturity with Chinese yuan.
The IMF executive board usually takes two weeks from time of staff-level agreement to vote on deal, meaning it’s unclear if any disbursement will be available before July 31 to make repayment back to the Fund.
--With assistance from Scott Squires.
(Updates with more from IMF statement in fourth paragraph, latest market data.)
