MercoPress. South Atlantic News Agency

Argentina to pay the IMF with Chinese money

Argentines will also be able to open bank accounts in yuan, the BCRA ruled

Argentine authorities Thursday announced that ”the payment of 2.7 billion dollars to the IMF corresponding to the second quarter will be made, partly in Special Drawing Rights (SDR) of the Treasury and partly with yuan, without using Central Bank reserves.”

Presidential Spokeswoman Gabriela Cerruti also said that “With the payment to the IMF, the commitment that the accumulation of reserves of the Central Bank will not be put at risk is fulfilled.”

The yuan or renminbi is the legal tender of the People's Republic of China. Argentina renewed this year a currency swap agreement with China for 130 billion yuan, (around US$ 19 billion). Special Drawing Rights (SDRs) are an international reserve asset used by the IMF. Their value is based on a basket of five currencies: the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the pound sterling.

Argentina has a year-on-year inflation rate of over 110% and a poverty rate of 40%, according to the official statistics bureau Indec, although economic activity is on the rise, with a 1.3% yoy increase in the first quarter of 2023.

“We are trying to settle the discussion of the next semester, or two quarters, with the IMF and, in the next hours, the program with the organization will be known,” Economy Minister and Presidential hopeful Sergio Massa said earlier this week. “An obsession that the next president must have is to gather all the dollars that Argentina needs to pay the IMF and get it out of Argentina never to return,” Massa also said.

The original IMF credit amounted to US$57 billion, contracted by Argentina during the government of the liberal Mauricio Macri. But after winning the 2019 elections, Fernandez asked the IMF to cancel the rest of the disbursements because -he argued at the time- “the country does not have dollars to pay back.”

Argentina's Economy Ministry explained that the IMF can exchange the yuan for SDRs and that the buyer will probably be China but it can be any other country.

The Casa Rosada is negotiating with the IMF authorities to modify the conditions of the program for the US$ 44 billion debt, signed in March last year, to make some goals more flexible.

Alberto Fernández's government is seeking to postpone payments due to the difficulties to collect dollars from agricultural exports due to a record drought, and due to the huge exchange gap between the official dollar and the parallel or “blue” (a euphemism for black market) dollar.

Meanwhile, Argentina's Central Bank (BCRA) Thursday announced it was allowing retail banking businesses to offer accounts in yuan, to make the renminbi a currency admitted by the country's financial institutions.

The BCRA stated that ”the measure is complementary to the decision of the National Securities Commission (CNV) which enabled the negotiation of negotiable securities in yuan“ in the local financial market and insisted that the ”swap“ mechanism that Argentina and China decided to renew ”may serve to grant liquidity to financial operations made in the yuan currency.”