The International Monetary Fund has called on Argentina to expedite the buildup of its international reserves, a primary point of contention raised by both the lender and various analysts regarding the nation’s economic strategy. At a press briefing on Thursday, IMF spokesperson Julie Kozack noted the rationale behind the petition, noting that a recent “improvement in market conditions” has created a “window of opportunity” for authorities to consolidate stability and “accelerate reserve accumulation.” In response to inquiries regarding the banded exchange rate implemented in lieu of a free-floating system for the peso-dollar exchange, she remarked that this is a decision made by the country’s authorities. “Our perspective at the IMF is that the selected regime must align with the enhancement of international reserves and the maintenance of external stability,” Kozac added.
The International Monetary Fund has indicated to the Milei administration that the accumulation of reserves is of paramount importance. The government has intentionally deviated from this directive, prioritizing disinflation as its primary economic objective, which has consequently led to a failure in meeting the target goals established in the agreement with the IMF. The request appeared to resonate promptly with government officials. During a recent event, Economy Minister Luis Caputo committed to fulfilling the requests made by the IMF. “We are going to accumulate reserves, and more than anyone might think,” he stated.
“Our objective is to build up reserves to enhance the strength of the Central Bank.” Caputo stated that the government intends to acquire reserves “to hold onto them.” He emphasized that over the last 20 months, all reserves have been allocated to satisfy bondholders. On Wednesday, Caputo stated that the government would maintain the banded exchange rate and would not permit the peso to float. “There is talk that we have to float to buy reserves, but that is not the case,” he stated, noting that the Milei administration acquired US$29 billion, yet did not retain them as “many of them were used to pay off debt.”
On Thursday, it is noted that the United States withdrew nearly US$900 million from its IMF reserves, coinciding with Argentina receiving an equivalent sum. Interestingly, Argentina’s Special Drawing Rights (SDR, the IMF’s “currency”) rose just prior to Buenos Aires’s obligation to remit US$840 million to the IMF. “Argentina’s foreign exchange reserves remain perilously low,” stated in a report, “even after the IMF provided $15bn of a new $20bn bailout earlier this year, and are set to come under further strain in the months ahead from repayments on previous fund loans and private sector debt.”