International Macri Fund: IMF approves another $5.4 billion for Argentina
The International Monetary Fund (IMF) board of directors today approved releasing to Argentina a $5.4 billion tranche from a stand-by credit line granted last year as a bailout to deal with the country's debt crisis.
The latest tranche, the fifth since the bailout was agreed to in June 2018 with President Mauricio Macri, will bring the total disbursed thus far to $44.5 billion.
The $57 billion credit line is the largest in the Fund's history and makes up 61% of its loan portfolio - leading Argentine critics to refer to the IMF as the "International Macri Fund."
The approval comes despite earlier misgivings by IMF acting Managing Director David Lipton, 65, who as Deputy Managing Director until the July 2 resignation of Christine Lagarde had objected to Macri's use of the credit line to finance capital flight.
Of the $39 billion disbursed during the bailout's first year, $30 billion were lost to speculative capital flight.
"Article VI of the IMF states that no member may use the Fund's general resources to face capital flight," opposition candidate Alberto Fernández pointed out.
"The objectives set at the time the loan was granted have been absolutely distorted."
The bailout, however, is strongly supported by U.S. President Donald Trump, who shares both a political affinity and longstanding friendship with the Argentine president.
Fernández, who leads in most polls, has accused the IMF of "financing Macri's campaign by indebting Argentina."
He, as well as centrist candidate Roberto Lavagna (currently in third place), have called for a rescheduling of the IMF debt, most of which is due in just two years: 2022 and '23.
From bubble to bailout
Including massive bond debts taken on by Macri in 2016-18, the next administration (2019-23) faces around $150 billion in foreign debt payments.
Macri turned to the IMF - who had supported his policies - when a $60 billion carry-trade debt bubble known locally as the "financial bicycle" collapsed in April 2018.
The crisis cut off Argentina's access to foreign credit markets, and forced the central bank to raise interest rates.
The ensuing recession - the second since Macri took office in 2015 - has led to a 5.8% fall in GDP, a 24.6% collapse in fixed investment, and 261,000 registered job losses.
Inflation has meanwhile risen to 57.4% - the highest since 1991.
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An elated Argentine President Mauricio Macri and acting IMF Managing Director David Lipton.
As Deputy Managing Director under his predecessor, Christine Lagarde, Lipton objected to Macri's use of the $57 billion IMF credit line to finance capital flight - a use the Fund's Article VI explicitly bars.
In his new post however, Lipton has yielded to pressure by President Donald Trump to rubber-stamp all loans to Argentina in a bid to prop up Macri (who's behind in most polls).
Critics warn that Trump's insistence is setting the stage for a likely default by Argentina by 2022, should the IMF refuse to renegotiate the debt with Macri's successor.
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