Argentina Aims to Allay IMF Default Fears With $6.5B China Currency Swap

Sergio Massa, Argentina’s economy minister and the ruling coalition’s presidential candidate, aims to make advance payments to the IMF to allay fears regarding that issue

Sergio Massa, Argentina's economy minister, in Buenos Aires on Jan. 23. Photographer: Anita Pouchard Serra/Bloomberg
October 18, 2023 | 11:15 AM

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Buenos Aires — Following the activation of a new tranche of Argentina’s currency swap with China was confirmed, Economy Minister Sergio Massa said the government will enable the payment of imports and will also use part of the funds to advance payments to the International Monetary Fund (IMF), allaying fears of a default.

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He also informed that there will be greater availability of foreign currency to intervene in the US dollar financial markets in order to control the exchange rate.

Minutes prior to Massa’s announcement, the central bank and President Alberto Fernandez had communicated the agreement with the People’s Bank of China, “for 47 billion renminbi ($6.5 billion), which can be applied to bilateral trade development objectives and to the stability of financial markets in Argentina”, according to the official statement.

“From today, we go from $5 billion to $11.5 billion available from the swap with China,” Massa said.


Payment of import debt, Argentina’s highest ever

Massa added that the activation of the swap with China “is great news” to “speed up the payment of imports for small and medium-sized businesses”.

“As from today, customs, the trade ministry and the central bank will start working to speed up the payment of imports and accelerate productive processes,” Massa said.

The latest Monetary Policy Report (IPoM) of the central bank showed that, at the end of September, the debt with importers of goods was $43 billion, the highest figure in Argentine history.


Payments to the IMF

According to Massa, the agreement with China allows “no one to doubt” Argentina’s ability to pay its maturities to the IMF in the next two months.

“Next week we are going to pay the IMF maturities, so that there is no uncertainty around that issue, and we will also have a greater capacity [for payment],” Massa said.

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Intervention in the exchange rate

“It gives us the peace of mind of having a guarantee so that we do not have pressure on financial dollars,” Massa said.

The official view is that, with this new agreement, the government and the BCRA will have the necessary foreign currency to inject liquidity into the financial exchange market, so that prices do not skyrocket again.


“We are going to have a greater capacity of intervention of the central bank in the market against those who speculated against the entral bank or against the Argentine reserves during these past few months,” he added.

Economic Planning Minister Gabriel Rubinstein also confirmed that the activation of the swap with China will allow those funds to intervene in the exchange rate to help financial dollars move away from the “panic” levels of recent days.

Massa anticipated another day of pressure against blue dollar brokers, however.

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