IMF meets Argentina's new economy minister

IMF meets Argentina's new economy minister

Economy & Policy Loans Politics Argentina US

The International Monetary Fund (IMF) is scheduled to meet Argentine Economy Minister Hernán Lacunza to discuss loan disbursements under a $56.3bn bailout.

Lacunza became a minister over the weekend after his predecessor, Nicolás Dujovne, resigned on Saturday, less than a week after President Mauricio Macri lost a primary election to the center-left candidate Alberto Fernández and his running mate, former President Cristina Fernández de Kirchner.

The IMF will hold the meetings before it agrees to sign a $7.6bn loan on September 15. Argentina needs the money to make $10bn in international bond payments and avoid default before the elections on October 27, sources told LatinFinance.

"We are pessimistic," said William Jackson, the head emerging markets economist at Capital Economics. "The IMF is going to have to say that the debt is unsustainable and, under those conditions, it can't lend to Argentina, unless it agrees to a restructuring."

The IMF could make the money available in September, or it could choose to wait until after the elections, Jackson said.

Either way, the meetings could provide some clarity on whether Argentina can avoid a default, something market observers say is increasingly unlikely after Fitch and S&P Global downgraded the country last week.

"We are going to have a sovereign default in the next couple of months or sooner," said a fund manager in Buenos Aires.

Fitch dropped Argentina by two notches to CCC from B. S&P, meanwhile, cut Argentina to B- from B. Both agencies gave the ratings a negative outlook, saying Argentina faces a recession and rising inflation.

Fitch said it expects the Argentine economy to shrink 2.5% in 2019 and remain flat in 2020. S&P said GDP will contract 2.3% this year, before recovering 0.5% next year.

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