Argentina’s financial program with the International Monetary Fund (IMF) will be on hold for some time as the nation grapples with severe political and economic uncertainty, the Fund’s Acting Managing Director David Lipton said an interview.
The IMF will “work toward an eventual resumption of a relationship – some kind of financial relationship with them – which may have to wait awhile,” Lipton told Bloomberg Radio on Wednesday. “Argentina’s situation right now is extremely complex.”
His remarks are the clearest indication yet that the IMF’s record US$56-billion agreement with Argentina is on ice for now, including a US$5.4-billion loan disbursement that’s been up for approval since September 15. The deal suffered a major blow when President Mauricio Macri lost August PASO primary vote to Peronist rival Alberto Fernández.
Macri’s defeat unleashed a currency crisis that forced him to implement capital controls and other measures that may violate key terms of the IMF deal. For his part, Fernández hasn’t yet presented an economic program nor announced who will lead his economic team, although he had called for a revision of the IMF deal. Investors now see a 95% chance of default in Argentina within the next five years.
Right now, Argentina doesn’t seem to meet IMF requirements, such as a sustainable debt path, for additional loan disbursements. Some analysts estimate the country has about US$6 billion in funding needs for the rest of the year, so IMF money would help cover upcoming debt payments.
Lipton, who met with Macri, Economy Minister Hernan Lacunza and Central Bank President Guido Sandleris Tuesday in New York, said the IMF will work with whoever wins the October 27 presidential election.
“We’re standing ready to help whichever side wins the presidential election,” he said. “It’s not our business to try to divine the political path forward, we can’t do that.”
Lipton downplayed, however, Argentina’s use of capital controls that are leading to the revival of its parallel exchange rates, including a black market. Such controls, he said, are “something we can monitor.”
“We’ve dealt with countries that have parallel markets in many, many circumstances. That’s not a big challenge,” he added. “The bigger issue there is how to calm the market and stabilize the situation.”
Lacunza met on Wednesday again with IMF officials in Washington and plans to return to the United States in a couple of weeks for the Fund’s annual meetings in October.