Wall Street is projecting that Argentina may secure up to $20 billion from the IMF, bolstering President Javier Milei’s austerity agenda. Disbursements are expected to be between $5 billion and $10 billion for 2025. Investors are interested in how these funds will be deployed and the timeline for currency control changes, as discussions with the IMF progress toward a new agreement.
Wall Street anticipates that the International Monetary Fund (IMF) will provide Argentina with up to $20 billion in a new loan program, supporting President Javier Milei’s austerity initiatives. Institutions such as UBS, Morgan Stanley, and Bank of America forecast initial disbursements between $5 billion and $10 billion for 2025. Argentina’s principal repayments on a previous loan will commence next year, providing a buffer for utilizing new funds to enhance the central bank’s reserves, potentially leading to the easing of currency controls.
Investors are focused on the Milei administration’s strategy for utilizing IMF funds and the timeline for dismantling existing controls. President Milei indicated that these funds would primarily serve to reduce the Argentine treasury’s debt owed to the central bank, aiming to rectify the monetary authority’s financial condition.
Alejo Czerwonko from UBS noted the potential for unexpected advantages in the size and timing of disbursements, estimating that the total could reach $20 billion, including $8 billion in new resources needed for principal and interest payments within Milei’s term.
Negotiations between the Milei administration and the IMF are progressing, as he recently informed Congress that he would seek IMF support shortly. This forthcoming deal would constitute Argentina’s third agreement with the IMF since 2018, following the unsuccessful previous programs aimed at stabilizing the economy.
Despite poor performance in emerging markets this year, Argentina’s sovereign bonds saw a rally following Milei’s recent address to lawmakers. Notably, bonds due in 2035 are currently trading around 65 cents on the dollar. Money managers may not be fully considering the likelihood of additional fiscal consolidation in the IMF agreement, according to Bank of America.
Argentina’s existing $44 billion aid program will expire by the end of 2024, with principal repayments to the IMF scheduled to begin in September 2026. This timeline underscores the urgency for the Milei administration to finalize a new deal this year, as confirmed by the IMF in December, post Milei’s decision against completing his predecessor’s review of the previous agreement. Securing a new program would enhance Argentina’s opportunity to re-enter international capital markets after the country defaulted on its sovereign debt in 2020, marking its ninth default historically.
Overall, the anticipated IMF loan of up to $20 billion could play a pivotal role in supporting Argentina’s economic recovery under President Milei. Investors are keenly observing Milei’s administration as it plans to utilize these funds and execute necessary reforms. Successful negotiation and implementation of this new IMF program could signal a return to international financial markets for Argentina, which faces a challenging economic landscape and historical defaults.
Original Source: www.bnnbloomberg.ca
