Argentina confident about new deal with IMF, peso rises

Argentina confident about new deal with IMF, peso rises

Reuters  | Sep 05, 2018 23:28

Argentina confident about new deal with IMF, peso rises

By Jorge Otaola and Daina Beth Solomon

BUENOS AIRES/WASHINGTON (Reuters) - Argentina's economy minister sounded upbeat on Wednesday about clinching a new deal with the International Monetary Fund after two days of talks in Washington, and said had sought U.S. support for securing approval from the IMF's board.

The peso closed 1.38 percent stronger at 38.52 per dollar on Wednesday, marking a rare pause in losses that have shaved more than 50 percent off its value this year, making it one of the worst performing emerging market currencies.

Economy Minister Nicolas Dujovne said he believed a deal to release early disbursements from a $50 billion standby loan agreement with the IMF could be put to its board by the end of the month, helping to shore up investor confidence in Latin America's third-largest economy.

Argentina has already received $15 billion from the credit line, which was agreed upon in June but has failed to clear up concerns about the country's ability to pay off its debt.

"I had a productive meeting," Dujovne said of his talks with IMF Managing Director Christine Lagarde and First Deputy Managing Director David Lipton. "I regard the progress we have made with enormous confidence and I am sure the reworking of the agreement will enable us to leave behind these days of anguish."

"We're looking at timeframes and many other questions in terms of which part of the program is precautionary," Dujovne said, adding that the Fund's board could vote on a revised deal before the end of the month.

Dujovne denied a report by local Argentine media outlet Infobae that Argentina was also in talks with the U.S. Treasury Department for a $5 billion to $10 billion credit line.

The news report sent Argentina's bond prices higher on Wednesday and helped Argentina's Merval (MERV) stock index close 4 percent higher.

Dujovne said that while Argentine officials had not spoken about direct financing from the United States, he had spoken with U.S. Treasury Secretary Steven Mnuchin about backing Argentina's bid to win the IMF's approval for a new deal.

"The U.S. Treasury's support for Argentina manifests itself through the support it excercises as a shareholder in the International Monetary Fund," Dujovne said.

The United States controls 16.52 percent of votes in the IMF, the largest of any country by far.

On Tuesday, as fresh talks between Argentine officials and the IMF started, U.S. President Donald Trump spoke with Argentina's center-right President Mauricio Macri by phone and voiced support for his handling of Argentina's crisis.

Dujovne said he would return to Buenos Aires as planned on Wednesday while his team continues to hammer out the details for a new deal.

On the eve of the talks with the IMF this week, Macri's government announced ambitious new targets to balance next year's fiscal deficit, to be paid for with new taxes on exporters and steep spending cuts.

But markets remained skeptical, with the peso losing 5.25 percent of its value against the dollar in the first two days of the week, despite the central bank selling $458 million on the local spot market.

The bank has sold more than $14 billion of reserves this year, including $100 million on Wednesday even after the peso reversed its initial losses and began to climb.

"With IMF talks happening in the United States, it is a hopeful climate, at least in this moment," economist Gustavo Ber told Reuters.

But many in Argentina believe Macri's government lacks the political will to implement unpopular spending cuts that are expected to be part of a revamped IMF deal.

© Reuters. A man stands outside the Stock Exchange building in Buenos Aires' financial district

The austerity measures announced on Monday aim to eliminate the primary fiscal deficit next year, when Macri is expected to seek re-election. Previous targets announced after the country inked the IMF deal in June included a 1.3 percent of GDP primary fiscal deficit in 2019, with no deficit in 2020.

Related News

Latest comments

Add a Comment
Please wait a minute before you try to comment again.
Discussion
Write a reply...
Please wait a minute before you try to comment again.

Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

English (USA) English (India) English (Canada) English (Australia) English (South Africa) English (Philippines) English (Nigeria) Deutsch Español (España) Español (México) Français Italiano Nederlands Português (Portugal) Polski Português (Brasil) Русский Türkçe ‏العربية‏ Ελληνικά Svenska Suomi עברית 日本語 한국어 中文 香港 Bahasa Indonesia Bahasa Melayu ไทย Tiếng Việt हिंदी
Sign out
Are you sure you want to sign out?
NoYes
CancelYes
Saving Changes

+