IMF tells Argentina not to risk ‘scarce’ reserves after bond buyback

IMF tells Argentina not to risk 'scarce' reserves after bond buyback

NEW YORK (Reuters) – The International Monetary Fund said on Wednesday it would prefer that Argentinas government, which announced a $1 billion buyback of foreign currency bonds, not undermine the targets of their multi-billion-dollar program.

“We do have targets in the program for reserves. Reserves are scarce, and we would prefer not to have actions that undermine the reserve accumulation that we‘re assuming in the program,” Nigel Chalk, deputy director of the IMF’s Western Hemisphere department, said when asked whether the buyback fits with the program objective of accumulating foreign reserves.

Argentinas bond repurchase program was announced on Jan. 18. The government has spent some $404 million in market purchases of bonds with a nominal value of more than $1.1 billion, according to Portfolio Personal Inversiones (PPI), a local brokerage.

Moodys considered it a “distressed exchange” tantamount to a default, while S&P Global Ratings called it “opportunistic” and equivalent to a debt restructuring as it affirmed its rating on the sovereign.

“The team has been working with the Argentine authorities on this plan with the debt buyback … first on the scale of it, how its being operated and then how it fits in with the program,” Chalk said in an interview with Reuters.

He added that the upcoming program review – a regular assessment that determines whether the next round of cash will be freed to the Argentine authorities – will judge whether targets were met at the end of December.

“But obviously, that review has a forward-looking element to it, and we want to have some comfort that reserves will also be met on a forward basis as well.”

Argentina‘s gross FX reserves total some $42.3 billion, according to its central bank as of Jan. 27, while calculations by Moody’s and PPI see net reserves closer to $6 billion.

“According to our estimates, the net reserve stock closes January at $6.1 billion, receding almost $2 billion in the month mainly due to coupon payments for $1.05 billion,” the brokerage told Reuters.

Argentina has the largest active IMF program, an Extended Fund Facility for $44 billion at the time it was announced on March 2022. About $24 billion has already been disbursed, most of which has been used to repay the fund what it is owed from a failed 2018 program.

The programs original targets ask for Argentina to accumulate $4.0 billion more in reserves this year.

(Reporting by Rodrigo Campos in New York; additional reporting by Jorgelina do Rosario in London; editing by Adam Jourdan and Paul Simao)

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