Wall Street predicts the IMF may provide Argentina with up to $20 billion, vital for President Milei’s austerity efforts. Disbursements of $5-$10 billion are expected for 2025, aiding central bank reserves. Investors are closely watching the government’s funding strategy as negotiations approach finalization, aiming for fiscal consolidation following missed payments in 2020.
Wall Street analysts project that the International Monetary Fund (IMF) may extend up to $20 billion in a new lending program to Argentina. This potential funding is crucial for President Javier Milei as it would lend support to his austerity measures. Major banks, including UBS Group AG, Morgan Stanley, and Bank of America Corp., suggest that the loan could be realized through disbursements ranging from $5 billion to $10 billion for 2025, while repayments on the previous loan are scheduled to begin next year. This influx of funds may strengthen Argentina’s central bank reserves, enabling a gradual easing of currency and capital controls.
Investors remain vigilant regarding how President Milei’s administration will allocate these resources and the timing of any deregulation. The President has indicated intentions to utilize IMF funds to reduce the national debt owed to the central bank, aiming to rectify the monetary authority’s financial statements. Alejo Czerwonko, Chief Investment Officer for Americas emerging markets at UBS, noted the potential for unexpected advantages, stating, “There is potential for positive surprises in the deal’s magnitude and timing of disbursements.”
Discussions between the Milei administration and the IMF are reportedly in advanced stages, with the President signaling to Congress his plans to advance the negotiation process in the near term. This would mark the third IMF program for Argentina since 2018, following two previous agreements that fell short in stabilizing the economy. Despite being among the poorer performers in emerging markets, Argentina’s sovereign bonds saw a rally following Milei’s address to Congress, with benchmark bonds due in 2035 trading at approximately 65 cents on the dollar.
Bank of America strategists have suggested that investors may not fully appreciate the potential of Argentina agreeing to further fiscal discipline as a condition for the IMF deal. The existing $44 billion aid program is set to conclude at the end of 2024, with principal repayments not commencing until September 2026. Consequently, securing a new deal this year is a priority for Milei, especially after he opted against finalizing the inherited agreement from his predecessor. A successful deal could facilitate Argentina’s re-entry into international capital markets following its 2020 sovereign debt default, which was the country’s ninth default historically.
In summary, Wall Street anticipates that the IMF may approve a substantial loan to Argentina, which would significantly support President Milei’s austerity strategy. As negotiations edge closer to completion, the future use of these funds remains a point of significant interest among investors. Successfully securing this new funding could restore Argentina’s access to international capital markets, marking a pivotal step in stabilizing the nation’s troubled economy.
Original Source: www.bnnbloomberg.ca
