Argentina strikes deal with People’s Bank of China to secure US$1.7 billion in yuan for IMF debt

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Currency swap to help Buenos Aires make good on US$2.7 billion owed, with remaining US$1 billion balance covered by Development Bank of Latin AmericaNo immediate economic benefits for Beijing, but deal advances Chinese government’s hope that renminbi is more widely used globally, analyst says

Sergio Massa, Argentina’s economy minister, speaks in Buenos Aires on Monday about the government’s planned debt repayment to the International Monetary Fund. Photo: AFP

The Argentine government has reached an agreement with the People’s Bank of China to secure US$1.7 billion in yuan through currency swaps to meet its US$2.7 billion payment obligations to the International Monetary Fund, its economy minister said on Monday.

The remaining balance of the payment will be covered by US$1 billion loaned by the Development Bank of Latin America, also known as CAF, based in Caracas, Venezuela.

Under the arrangement, Argentina had deposited pesos with the PBOC, which granted renminbi in return. Buenos Aires was then able to make its payment to the IMF without having to draw upon dollar reserves, now estimated by the Central Bank of Argentina to be worth minus US$8 billion.

Sergio Massa, the Argentine economy minister, thanked the PBOC and Chinese government “for making the decision to authorise the disbursement”, saying it would. “ensure that Argentina can continue its exports while meeting its payment obligations” to the IMF.

The Argentine Ministry of Economy says the terms of the swap with the People’s Bank of China are part of a confidential agreement and cannot be made public. Photo: Reuters

The agreement would allow Argentina to meet its IMF obligations “without using a single dollar of its reserves”, Massa added.

The deal represents another step in the South American country’s wider usage of China’s currency following its decision in June to allow commercial banks to open customer accounts in yuan. Also this year, Argentina’s securities regulator approved the issuance of yuan-denominated securities in the local market.

A government source familiar with the matter told the Post that the swap was expected to be a short-term debt repaid with reserves, with China’s involvement possibly serving as “a temporary bridge” until the funds committed by the IMF arrive.

Neither the duration of the loan nor the interest rate Argentina would have to pay on the new debt were disclosed by either the CAF or the economy ministry. Buenos Aires said the terms of the swap with the PBOC were part of a confidential agreement and could not be made public.

The IMF debt in question dates back to 2018, when then-president Mauricio Macri secured a US$44 billion loan, the largest in IMF history at the time. The debt was later renegotiated by the government of Alberto Fernández, Argentina’s current leader.

Buenos Aires committed to the IMF to adjust its level of public spending, boost reserves and maintain competitive interest rates in exchange for new disbursements to pay off the debt it took on five years prior.