The Government approved the contract model which will allow progress with granting of a credit of US$ 700 million by the Inter-American Development Bank (IDB)intended to strengthen reserves.
The Decree 691/2022 published this Friday in the Official bulletinempowers the Minister of Economy, Serge Massaor the officials designated, to “sign, in the name and on behalf of Argentina”, the loan contract with the IDB, and to agree on “the modifications that are convenient” for its execution.
last wednesday the IDB board approved a package of Special Financing for Development (SDL) that will enter imminently, and will serve to increase the reserves of the Central Bank (BCRA).
The approval took place within the framework of Economy Minister Sergio Massa’s visit to Washington, on the occasion of the annual meeting of the International Monetary Fund (IMF) and the World Bank.
“This disbursement helps strengthen Argentine reserves,” Massa said on Wednesday on his Twitter account, in a message in which he also noted that “it was approved unanimously.”
.@el_IDB The Board of Directors has just approved a disbursement of 700 million dollars, which will be paid in the next 48 hours. in the Reserves.
It was approved unanimously.
It is part of the financial support package that Argentina has from different multilaterals.– Sergio Massa (@SergioMassa) October 12, 2022
The financing will have an amortization period of seven years, a grace period of three years and an interest rate based on the SOFR (Secured Overnight Financing Rate, reference rate in dollars).
According to the contract, the objective of the loan will be to “support economic and social recovery in Argentina” by strengthening public finances, contributing to price stability and strengthening the balance of payments.
One of the conditions imposed for the IDB to unblock the transfer was that the International Monetary Fund (IMF) make the disbursement of US$ 3,800 million corresponding to the second review of the Extended Facilities Agreement (EFF) with the country, which occurred on last Tuesday.
In the same way, it was requested that arrears of external debt payments not accumulate and that the annual effective monetary policy rate of the BCRA be raised by 365 basic points.
“The loan will offer budgetary support for Argentina to cover its short-term financing needs and protect social spending for vulnerable groups and infrastructure, while reforms are implemented to reduce the public deficit, promote price stability and ensure the sustainability of debt,” the IDB said in a statement.
The loan -the IDB affirmed- is “aligned with the objectives of the IMF’s Extended Service Program”, and will be “complemented by financial assistance from other multilateral organizations to Argentina”.
The loan was committed by the IDB at the beginning of September in the framework of Massa’s first visit to the United States, and the processing of a US$500 million PBL (Policy-Based Lending) loan is still pending.
Both credits were delayed in the IDB agenda in the previous months by decision of the recently dismissed president of the organization, Mauricio Claver Carone
Along with the latest disbursement from the IMF, the Government expects to add some US$5,000 million in reserves, to which -if the third review is approved- another US$5,800 million from the IMF will be added in December.
