EM LATAM CREDIT: Argentina: Bought USD to Build Reserves
(ARGENT; Caa3pos/CCC/CCC+)
"*ARGENTINA'S CAPUTO CONFIRMS TREASURY BOUGHT $200M FOR RESERVES" - Bbg
One of the key tenets of the IMF USD20bn agreement from April 2025 was the plan to increase reserves by buying USD in the FX market.
The government has resisted such actions as it has instead tried various economic reforms as well as international market bond issuance of Peso bonds that could be bought with Dollars but that has been insufficient in meeting the IMF target.
The government wants to maintain a strong enough currency to keep the disinflationary trend persisting. The problem is that a strong ARS is bad for the current account and balance of payments which hinders the accumulation of reserves.
June was the initial timing for the first review by the IMF but it was postponed until July, possibly due to the lack of success in building reserves, with an IMF pending disbursement of USD2bn contingent on the outcome of the review.
As the government has so far met the other key targets of the IMF agreement such as the primary budget surplus, fiscal restraint and inflation we think the IMF is inclined to release the funds. We see this buying of dollars in the open market as a bit of appeasement and show of good faith by the government and possibly some pressure applied by the IMF.
ARGENT 2035s were last quoted USD67.67 which was unchanged today, 5 points higher QTD and 1 point higher YTD.
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