IMF suspends release of $3 billion tranche of $50 billion Argentina bailout
The International Monetary Fund (IMF) announced a suspension of a $3 billion disbursement scheduled for today as part of the $50 billion stand-by credit line agreed to with Argentina on June 8.
A press release issued by the IMF stated that the disbursement is to be suspended pending ongoing negotiations requested by Argentine President Mauricio Macri for an $18 billion advance and for relaxed terms.
Macri had already drawn $15 billion from the credit line on June 22 - of which $13 billion have already been spent, mostly to compensate for capital flight.
The June 8 credit line was stipulated on Argentina's meeting a set of economic goals, including an inflation rate of no more than 2% a month (28% annualized) and budget cuts of $10 billion (8% of the federal total).
Argentina yesterday reported an inflation rate of 3.9% in August, and 34.4% from the same time last year. September inflation is projected to exceed 6% a month.
From bubble to bailout
The country's current crisis began in April, when reports that the current account deficit had doubled (to a record $31 billion) and that its foreign debt expanded by $52 billion in 2017 alone set off a wave of capital flight - some $25 billion so far this year.
Efforts to stem capital flight, including raising central bank discount rates from 27% in April to 60% now, have thus far failed: The peso has since lost half its value, pushing inflation from 25% in 2017 to an offically projected 42% this year.
Higher interest rates are in turn exacerbating the recession, with GDP down 6.7% as of June and retail sales down 8% in August.
Critics note that besides being unconstitutional, the agreement includes no provisions to curb record current account (external) deficits or capital flight.
The currency crisis intensified on August 29 after President Mauricio Macri falsely claimed to have secured IMF approval for the $18 billion advance. The dollar has since climbed 26%, to 40.53 pesos.
Déja vu
Today's announcement recalls the IMF's December 5, 2001, decision to suspend a $1.26 billion tranche of a similar, $38 billion stand-by credit line agreed to with Argentina a year earlier.
Facing escalating interest payments to bondholders as well as amounting capital flight, Argentina defaulted on $82 billion in bonds within a month of the IMF suspension.
The president at the time, Fernando de la Rúa, who, like Macri, had been applauded by both the IMF and the White House, resigned amid riots.
At: https://translate.google.com/translate?sl=auto&tl=en&js=y&prev=_t&hl=en&ie=UTF-8&u=https%3A%2F%2Fwww.eldestapeweb.com%2Fel-fmi-suspendio-pagos-argentina-que-se-redefina-el-acuerdo-n49186&edit-text=
There, there: the IMF's Christine Lagarde comforts Argentine Economy Minister Nicolás Dujovne before suspending today's scheduled $3 billion disbursement.
Refusing to enact currency controls, Argentina's Macri has mostly used recent IMF loans to finance record capital flight - over $25 billion so far this year. Most analysts now expect a bond default no later than March.
