The lack of dollars in the central bank’s international reserves forced the Argentine government to make an unprecedented decision this Friday. For the first time, it honored a payment obligation to the International Monetary Fund (IMF) in Chinese yuan equivalent to US$1 billion, with an additional US$1.7 billion paid in Special Drawing Rights, considered the IMF’s reserve currency a basket of the world’s major currencies.
This is the first time that the Alberto Fernández government has used discretionary yuan from currency exchanges with China to pay the international organization. This money was intended to finance imports from the Asian country, but officials had already anticipated that it could be used for other purposes.
“The payment of the June maturities was made without dollars, but with SDRs [special drawing rights] and yuan,” the economy ministry, led by presidential candidate Sergio Massa, said in a statement. The IMF confirmed the transaction. The international organization accepted this form of payment while negotiations to restructure Argentina’s debt were ongoing.
The Argentine team has asked to restate the targets agreed with the IMF for 2022, as the impact of the worst drought the country has experienced in decades makes it impossible to achieve them. Rural areas are the country’s most important economic engine and, according to the latest calculations, the losses due to the lack of rain amount to 20 billion US dollars.
The negotiations are taking place in the middle of an election campaign, with Massa holding the dual role of economy minister and the Peronist movement’s pre-candidate for the presidency. The country will hold primary elections on August 13 and general elections on October 22.
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