[1/2]People gather near the presidential palace during a protest in Buenos Aires, Argentina, on June 16, 2023, as inflation hits 114 percent, hurting wages and spending power, and many condemn policy tightening. It claims to be under an agreement with the IMF.Reuters/Miguel Lo Bianco/File Photo
BUENOS AIRES/LONDON, July 23 (Reuters) – The International Monetary Fund (IMF) will need to finalize the basis for a staff-level agreement to review its $44 billion loan to Argentina in the coming days, the Washington-based fund said on Sunday.
“The team from the Ministry of Economy, the Central Bank of Argentina and IMF staff have completed the core technical work of the next review,” the IMF said on Twitter.
“The core objectives and parameters underlying the ‘staff-level agreement’ have been agreed and will be finalized in the coming days before proceeding to review the Argentine programme,” it added.
As part of the deal, the South American country will announce tax and currency measures that effectively devalue the peso, as well as introduce a new preferential exchange rate for agricultural exports and imports, government officials said.
The official added that corn exporters can sell their goods abroad at 340 pesos to the dollar at a provisional rate to promote exports through Aug. 31. This is 27% cheaper than the current rate of 268 pesos per dollar.
The government also plans to introduce a 7.5% tax on the import of some goods and a 25% tax on the import of most services, bringing the new exchange rates to about 288 pesos and 335 pesos to the dollar respectively.
Argentina faces an IMF maturity of about $3.4 billion in July-August, while its central bank’s net reserve deficit is about $6.5 billion.
Buenos Aires wants to revise its economic targets agreed with the Fund and bring forward some of the IMF’s planned expenditures this year as it battles a severe financial crisis that reserve shortfalls could exacerbate.
An economy ministry official told Reuters a spending program for the second half of 2023 had been agreed, with staff-level agreements likely to be signed on Wednesday or Thursday.
Economy Minister Sergio Massa said in an interview with the C5N television network on Sunday that there would be a “massive spending package” for August and November under the IMF programme, but gave no further details.
Under the current program, the country is expected to receive $4 billion in July, more than $3.3 billion in September and another $3.3 billion in December. These expenditures will primarily be used to repay the failed 2018 bailout.
Argentina also suffers from high inflation and large budget deficits, but its main export source, agriculture, has been hit by a severe drought, taking a heavy toll on its foreign currency earnings.
The IMF said the deal recognizes the effects of drought and damage to exports and tax revenues and aims to “strengthen fiscal order and strengthen reserves.”
Reported by Hernan Nessi and Giorgelina de Rosario, edited by Nick Zieminski, Kim Kogil and Jacqueline Wong
Our criteria: Thomson Reuters Trust Principles.