Wall Street anticipates Argentina may receive a $20 billion IMF loan, aiding President Milei’s austerity plans. Banks forecast $5-$10 billion disbursements for 2025 as negotiations near completion. The IMF deal could improve Argentina’s economic stability and boost investor confidence despite prior failed agreements and a recent history of defaults.
Wall Street analysts anticipate that Argentina may secure up to $20 billion in a new agreement with the International Monetary Fund (IMF), bolstering President Javier Milei’s austerity initiatives. Major banks, such as UBS Group AG, Morgan Stanley, and Bank of America, forecast that this loan could involve disbursements ranging from $5 billion to $10 billion in 2025. With principal payments on the previous IMF loan not commencing until next year, these funds could significantly enhance Argentina’s central bank reserves, allowing for potential easing of currency and capital restrictions.
Investors are closely monitoring how President Milei’s administration plans to allocate the IMF funds and the timeline for lifting existing controls. Milei has indicated that the financial support will be primarily utilized to alleviate the Argentine treasury’s debt owed to the central bank, aimed at improving the monetary authority’s balance sheet.
Alejo Czerwonko, chief investment officer for Americas emerging markets at UBS, noted, “There is potential for positive surprises in the deal’s magnitude and timing of disbursements.” He projected that the agreement could include up to $20 billion, incorporating $8 billion earmarked for principal and interest payments to the IMF through the duration of Milei’s presidency.
Negotiations between Milei’s government and the IMF are reportedly approaching completion, following his recent address to Congress where he pledged to pursue IMF support imminently, though he offered few details. This agreement would mark Argentina’s third IMF program since 2018, succeeding two previous attempts that failed to stabilize the country’s economy.
Despite being one of the poorer performers among emerging markets this year, Argentina’s sovereign bonds experienced a rebound following Milei’s address. As of Wednesday, benchmark bonds due in 2035 were trading at approximately 65 cents on the dollar, based on Bloomberg’s pricing data.
Bank of America strategists, including Lucas Martin, expressed in a report to investors, that money managers might be underestimating the likelihood that Argentina will consider additional fiscal consolidation in an agreement with the IMF. The existing $44 billion aid program will conclude by the end of 2024, with principal repayments to the IMF beginning in September 2026. Thus, it is crucial for the Milei administration to finalize a new deal this year to reengage with international capital markets after Argentina’s ninth default in its history in 2020.
In conclusion, Argentina is set to negotiate a potentially substantial loan from the IMF, with expectations of up to $20 billion that would support President Milei’s austerity measures. The disbursement intentions and usage of these funds, combined with the timing of the agreement, remain pivotal as the Milei administration seeks to stabilize the economy and reintegrate into global capital markets. Timely implementation of fiscal measures could prove essential in securing favorable terms for this agreement.
Original Source: www.bnnbloomberg.ca
