LONDON — Argentina is considering using a $7.5 billion disbursement from the International Monetary Fund to repay China some of the money it borrowed through a currency swap line, two officials said on Wednesday. sources with direct knowledge of the case.
The third largest in Latin America economy recently used the equivalent of $2.8 billion yuan to cover just over half of the two repayments of a 2018 IMF loan, to avoid a default by the multilateral lender.
With net negative foreign exchange reserves of more than $8 billion, Argentina is expected to return the $1.7 billion it used in the July swap to the People’s Bank of China (PBOC) as early as this week. one person said, asking not to be told. named because the details of the agreement are private. Buenos Aires is not required to immediately refund the yuan it used in June, the source added.
These plans shed light on the crucial bridging loan that China extended to Buenos Aires through a monetary line established with Argentina more than a decade ago, the details of which have remained largely under wraps.
The cash-strapped economy used money from the Chinese swap line to pay for imports as well as repay IMF debt.
Accessing the yuan to make IMF payments has been a lifeline for Argentina, which faces a severe dollar shortage and struggles to keep its $44 billion program with the Fund alive.
The swap line signed by the People’s Bank of China in 2009 with Buenos Aires was the first concluded with a Latin American country. It has since been renewed and expanded by Argentina’s leftist and pro-market governments, and now stands at just over $18 billion.
Neither China nor Argentina has disclosed many details about the swap agreement or the borrowings under it, so little is known about the monetary line signed there. more than ten years.
The IMF’s executive board on Wednesday approved two combined reviews of a 2022 loan, which is essentially a refinancing line for the failed 2018 program.
This will trigger a disbursement of $7.5 billion, which will allow Argentina to also repay $1 billion to the Development Bank of Latin America, known as CAF, and a loan of $775 million. from Qatar – both of which were also used to pay off IMF debt.
“The funds that will be disbursed today will partly go to Qatar, CAF and reduce the used amount of the swap line. Qatar will be paid in SDRs, China in yuan,” a source told Argentina’s central bank, adding that they expected the CAF loan to be repaid in US dollars.
The PBOC did not immediately respond to a request for comment from Reuters when it opened on Thursday, while a CAF spokesperson did not respond to a request for comment.
Argentina is set to elect a new president in October amid triple-digit inflation and growing capital controls that have crippled the country. economy. Uncertainty remains high as to whether Argentina will maintain its payments to the IMF thereafter, or whether it will have to – or be able to – use the swap again.
The IMF money will provide sufficient funds for Buenos Aires to pay the IMF’s September and October installments, although a new disbursement is subject to a program review in November.
READ: IMF expects agreement with Argentina in coming days
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