He International Monetary Fund (IMF) announced on Tuesday that it reached an agreement at the technical level with the president’s government Javier Milei for a credit line of US $20 billion under the format of Extended ease (EFF)with a duration of 48 months. This pact, which now expects the approval of the IMF directory in the next few days, represents a crucial lifeguard for an Argentine economy that dealt with exhausted reserves, commitments in foreign currency and a framework of exchange controls.
However, the true unknown resides in what is not yet revealed: the amount and schedule of the disbursements, the associated conditions and – especially – if this agreement will bring a reform in the exchange rate regime.
A lifeguard of US $20,000 million with conditions to be defined
The joint statement between the IMF and the Argentine authorities was sparse, just confirming the total amount and duration of the program. Details about the disbursement calendar, specific goals and policy commitments will be known only after the final approval of the agency’s directory, a procedure that could be resolved in a matter of days or weeks before the urgency of the Argentine financial situation.
What is clear is the magnitude of the challenge ahead. For the next four years, Argentina will face capital maturities with the IMF for US $ 14,000 million from previous loans, which implies that this package of US $20 billion will provide net financing of approximately US $ 6,000 million in fresh funds.
That additional money has a specific destination: cancel uncompromising letters, titles called dollars and non -negotiable that the Central Bank of the Argentine Republic (BCRA) maintains in its balance as an inheritance of past fiscal deficits. These letters have been a heavy load for the Central Bank, immobilizing reserves and complicating monetary policy. His retirement could give a respite to the BCRA, although in essence he replaces a creditor (the Central Bank) with another (the IMF), without significantly reducing the total debt of the country but going from internal debt to external debt.
Speculations about the amount of initial disbursement, which would be completed after the approval of the Board of Directors, are the order of the day. The managing director of the IMF, Kristalina Georgieva, suggested that an initial payment of 40% – self -devoting au $ S8,000 million – would be “appropriate” given the advances of the Milei economic program. Argentine officials, meanwhile, allowed to transcend figures of up to US $1,000 million, while some optimists risked that it could arrive in $ 15,000 million, perhaps promoted by political pressures of Milei Republican allies in Washington. Whatever the amount, this first turn will be a vital injection for the BCRA, whose reservations have fallen after a strong sale of currencies in recent weeks.
Exchange policy under the focus
Beyond the dollars at stake, the true examination of the agreement – and its ability to transform Argentina’s economic trajectory – will lead to decisions about the exchange regime May they accompany him. The current Crawling PEG scheme, with a monthly increase of 1% of the dollar, combined with the “Blend dollar” mechanism – where exporters liquidate 20% of their income in the financial market – and an aggressive sterilization of the issuance of pesos, has been a pillar of the stabilization efforts of Milei since it assumed in December 2023. This has been put in doubt by various rumors in the frame Negotiations of this Agreement.
March marked a turning point, with the Central Bank going from net buyer to net seller, losing US $ 1,156 million, an abysmal contrast with purchases of US $ 2,882 million of the same month of the previous year. The trigger was not the rhythm or the scale of negotiations with the IMF, but the rumors of an imminent change in exchange policy linked to the agreement. Neither the Minister of Economy, Luis Caputo, nor the head of the BCRA, Santiago Bausili, categorically denied these versions, feeding an uncertainty that generated a rise in financial dollars and accelerated the bleeding of reserves.
The market considers several scenarios. Keep the status quo – the crawling PEG, the Blend dollar and the sterilization of weights – it seems less and less viable. It is a scheme that, despite its initial successes, has failed to accumulate reservations in a robust way to resist external shocks or to dismantle the exchange “stock”.
An alternative would be a discreet devaluation – a unique jump in the official exchange rate – second of a return to a adjusted crawling, perhaps eliminating the blend dollar to channel more currencies to the BCRA. This could strengthen reserves, but risk rekindling inflation, which seems to have accelerated marginally in recent months.
Another option, which gains adherents in Buenos Aires financial circles, is to adopt a system of exchange bands. In this case, the BCRA would establish a floor and a ceiling for weight, allowing fluctuation within that range without direct intervention. The roof would mark the expected maximum devaluation, providing clarity and some flexibility. Over time, these bands could be expanded, bringing Argentina closer to a freer exchange market.
A total release – eliminating the stocks and moving on to a floating exchange rate – continues outside the radar for now. Milei himself ruled out as premature, citing insufficient reservations and a fragile investment confidence. The IMF also seems cautious to force Argentina towards chaotic liberalization, remembering past failures.
2018 lessons on the horizon
Argentina’s story with the rescues of the IMF projects a long shadow. In 2018, under the government of Mauricio Macri, a Stand-by record for US $ 57,000 million-then reduced to disbursements for US $ 44,500 million-did not manage to stop a exchange crisis or restore access to markets. A large part of those funds vanished in fruitless dollars, payment of debt and deficit financing until the reserves were exhausted and the economy collapsed. Today, both in Buenos Aires and Washington, political leaders seek to avoid repetition.
That antecedent emphasizes why the exchange piece matters as much as the money itself. An initial initial disbursement could underpin reserves, but without a credible exchange frame, those dollars run the risk of being another temporal patch.
What is at stake
While the IMF directory prepares to vote, the market awaits definitions on three fronts: the disbursement schedule, the policy conditions and the exchange direction. A first robust payment – let’s say, US $ 10,000 million or more – could calm the markets, strengthen the fire capacity of the BCRA and point out an international support for Milei’s reforms. But if it is accompanied by a confusing or excessively rigid exchange plan, it could only postpone the inevitable.
The implications go beyond the price of weight. Relaxing the stock could unlock trade and investment, but only with coherent monetary rules. The destination of the Blend dollar is also key: its 20% has contained the gap between official and parallel rates, but at the cost of diverting dollars from the reserves. And the broad monetary base goal of the BCRA, pillar of the anti -inflationary struggle of Milei, hangs from a thread if the sterilization weakens.
For now, the MRADO awaits the fine text of the IMF with contained expectation. The $ 20,000 million agreement is a milestone, without a doubt – four -month spelling of arduous negotiations and a government willing to negotiate. But your success will depend less on the dollars than you deliver than on the policies you demand. In a country where exchange crises are almost a rite, that is the true story that everyone will be observing closely.
Financial Analyst
Source: Ambito
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