Wall Street predicts Argentina may receive up to US$20 billion from the IMF, enhancing President Javier Milei’s austerity measures. Analysts emphasize the importance of the funds’ usage and timely disbursements, as well as potential fiscal consolidations agreed upon with the IMF. This programme would aid Argentina’s return to international capital markets.
Wall Street analysts anticipate that the International Monetary Fund (IMF) may extend a loan of up to US$20 billion to Argentina. This development is considered crucial for President Javier Milei’s austerity measures. Financial institutions such as UBS Group AG, Morgan Stanley, and Bank of America Corp. predict that disbursements for 2025 could range from US$5 billion to US$10 billion, allowing Argentina to bolster its Central Bank reserves, potentially leading to a lift in currency and capital controls.
Investors are particularly focused on how President Milei plans to utilize the funds and proceed with dismantling existing controls. The president has indicated that the IMF funds would principally be employed to reduce the Argentine treasury’s debt owed to the central bank, aiming at a consolidation of the monetary authority’s balance sheet.
Alejo Czerwonko, the Chief Investment Officer for Americas Emerging Markets at UBS, remarked that there is “potential for positive surprises in the deal’s magnitude and timing of disbursements.” He suggested that the total could reach US$20 billion, which would encompass US$8 billion in new funds intended for both principal and interest payments to the IMF during Milei’s term.
Negotiations between President Milei’s administration and the IMF appear to be in the final stages. Recently, Milei expressed his intent to solicit support for the forthcoming programme in Congress, although specific details were not disclosed. If successful, this would constitute Argentina’s third IMF programme since 2018, following two previous agreements that did not stabilize the economy.
Despite being classified among the poorer-performing markets, Argentina’s sovereign bonds saw an uptick following Milei’s legislative address. For example, benchmark bonds due in 2035 are currently trading at approximately 65 cents on the dollar.
Bank of America strategists, including Lucas Martín, noted that money managers may be undervaluing the likelihood of Argentina adopting additional fiscal consolidations as part of the IMF deal. As the country’s US$44 billion aid programme is set to expire at the end of 2024, with principal repayments to the IMF beginning in September 2026, the Milei administration seeks to finalize an agreement this year.
The IMF had confirmed in December that discussions regarding a new loan were in progress, particularly after Milei chose not to complete the final reviews of the previous deal inherited from his predecessor. Establishing a new programme would mark a substantial step towards facilitating Argentina’s return to international capital markets after the nation defaulted on sovereign debt payments in 2020—the ninth default in its historical context.
In summary, Wall Street anticipates a substantial IMF loan for Argentina, which could significantly aid President Javier Milei in his austerity efforts. The administration remains focused on how it will employ these funds while also planning to modify existing economic controls. While negotiations continue, Milei’s administration is striving to finalize this deal to pave the way for Argentina’s return to the global capital markets.
Original Source: www.batimes.com.ar
