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IMF hardens stance on failing Argentina program

The IMF has intensified its scrutiny of Argentina’s $44 billion loan program as the country grapples with triple-digit inflation and dwindling net reserves ahead of a presidential vote this month. The IMF is particularly concerned about a rapid depletion of international reserves since the August program review and board members have reportedly criticized Argentina’s government for “mismanagement” rather than using softer terms such as “policy slippages” or “underperformance.”

Argentina’s central bank has intervened significantly in the foreign exchange market, injecting $2.7 billion in the last three months to alleviate pressure amid the election cycle. Argentina’s net foreign currency reserves are negative $15.3 billion, and the country’s economic challenges have been exacerbated by severe droughts affecting agricultural exports.

The IMF's more stringent position comes ahead of a scheduled review of the program in early November, a pivotal step for the country to secure the next tranche of financing, contingent on meeting program objectives.

Argentina, facing an increasingly tight presidential race, reassured during the October meeting that it remains committed to meeting its IMF payments, with the next maturity of approximately $900 million due in December.

Struggling with a scarcity of dollars, Argentina has employed a combination of Chinese yuan from a swap line with Beijing's central bank and other financing sources to fulfill payments since June. The backdrop includes Argentina becoming the IMF's top debtor in 2018, initially receiving a $57 billion bailout to address economic crises, followed by renegotiations under the Peronist government in 2019 to refinance the remaining $44 billion with more modest economic targets.

Whoever takes office on Dec. 10 will inherit inflation that is expected to reach nearly 200% by year’s end and interest rates at 130%, which are the world’s highest. The central bank has virtually no reserves, and Argentina owes $44 billion to the International Monetary Fund. Cut off from global financial markets, the government relies on ramped-up money printing to cover a widening budget deficit while turning to China for billions of dollars in loans.

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