IMF approves release of $11 billion loan for Argentina - part of a record $56 billion bailout
The International Monetary Fund (IMF) today approved the release to Argentina of a $10.87 billion tranche from a credit line agreed to last year with the Mauricio Macri administration.
The disbursement, part of a $56.3 billion standby financing deal to help Argentina recover from a debt crisis that has rocked the South American nation over the last year, is subject to approval by the IMF executive board.
The latest tranche brings the total drawn from the credit line since June 22 to $39 billion. All but $5.9 billion of the remainder is scheduled to be disbursed by this October - when the deeply unpopular Macri faces voters in his bid for re-election.
The bailout, agreed to on June 8, gave the IMF far-reaching control over Argentina's monetary and budgetary policy - something opponents see as unconstitutional.
With today's announcement, the IMF also gave its approval to Macri's use of up to $9.6 billion of the loan to shore up the peso - which lost half its value between April and August but has since stabilized at around 40 to the U.S. dollar.
The peso lost 1.4% on today's news, to 41.59.
From bubble to bailout
The current crisis began last April, when a $60 billion carry-trade debt bubble known in Argentina as the "financial bicycle" ultimately collapsed.
The crisis cut off Argentina's access to foreign credit markets, forcing Macri to turn to the IMF and to raise the central bank discount rate from 27% a year ago, to 64% currently.
This rate hike has in turn exacerbated the country's recession - the second since Macri took office in late 2015: GDP fell 7% as of December, with fixed investment falling 19.2% and 191,000 registered job losses.
Inflation has meanwhile risen to 51.3% - the highest in 27 years.
Default worries
The short-term profile of much of this debt has led to concerns of a future bondholder default similar to that of 2001.
A report from the UMET External Debt Observatory noted that between 2020 and 2023, bondholder repayments alone (mainly domestic) will average $34 billion annually - plus $12 billion annually for five years until 2025 for the IMF.
At: http://www.batimes.com.ar/news/economy/imf-staff-approves-release-of-us1087-billion-tranche-of-loan.phtml
IMF South America division head Roberto Cardarelli and IMF Argentina division head Trevor Alleyne during their review mission in February.
Cardarelli reportedly admitted in private that the bailout was "unsustainable" and that his "sole mission was to help guarantee Macri's re-election, at Washington's request."
