IMF loan in election year: Argentina opts to 27pc weaker peso for trade only
Business
South American country wants revival of $44bn deal
BUENOS AIRES/LONDON (Reuters) – Argentina on Monday set new weaker trade-related exchange rates while keeping the official peso rate stable, in a push to meet expectations in its $44 billion agreement with the International Monetary Fund while avoiding a politically-costly devaluation.
Corn exporters will be able to sell their goods abroad at 340 pesos per US dollar, according to a government decree, a temporary rate to bolster exports until Aug 31. That is about 27 per cent weaker than the current rate of 268 pesos per dollar, which remained unchanged.
The government will also introduce a 7.5pc tax on some goods imports and a 25pc levy on imports of most services, with new FX rates at around 288 and 335 pesos per dollar, respectively, according to a government official.
The move comes as the country faces delayed talks with the IMF on the fifth review of a $44bn programme, which was scheduled for June.
The measure is a "half-way point between the devaluation requested by the IMF and the political order not to devalue during an election year," said Roberto Geretto, an economist at Fundcorp.
Argentina's government is grappling with an annual inflation rate of over 100pc which a wider devaluation would exacerbate.
"The fiscal devaluation improves Treasury revenues and helps save reserves," Geretto added, but there are still "points to resolve" in negotiations. Both parties have said a deal is close, but an agreement is not finalized yet.
An IMF spokesperson said the measures announced by the Argentine authorities are "positive to strengthen reserves and consolidate the path of fiscal order, fundamental variables to strengthen economic stability."
'BIG PACKAGE OF DISBURSEMENTS'
Argentina faces maturities with the IMF worth some $3.4bn between July and August, at a time when the central bank's net reserves are about $6.5bn in the red.
Buenos Aires is hoping to alter the economic goals it had agreed with the global lender and bring forward some IMF disbursements scheduled for this year as it battles a severe financial crisis which a lack of reserves could exacerbate.
An economy ministry source told Reuters the disbursement program for the second half of 2023 has been agreed and the staff level agreement could be sealed on Wednesday or Thursday.
Economy Minister Sergio Massa, who is running for president ahead of an August primary vote, said on Sunday in an interview with a local TV network that there is a "big package of disbursements" in August and November under the IMF programme, without providing any further details.
Under the current programme, the country is expected to get $4bn in July, more than $3.3 billion in September and another $3.3bn in December. These disbursements are set to mainly repay a failed 2018 bailout.
Argentina, which is also struggling with a significant fiscal deficit, has suffered a considerable hit to its foreign currency income due to a severe drought which crimped farm output, its principal source of exports.
