IMF – Argentina US$ 45 billion Financial Assistance Deal – Agreement Restricts Adoption of Crypto-Currencies by Argentina

  • IMF staff and the Argentine authorities had reached a lending agreement for Extended Fund Facility (EFF)
  • Extended Fund Facility (EFF) will involve US$ 45 billion assistance
  • Agreement discourages the use of crypto-currencies with a view to preventing money laundering

The IMF has reached an agreement with Argentina for addressing economic and financial policies by granting US$ 45 billion assistance through Extended Fund Facility (EFF) Arrangement. Argentina has a large balance of payments obligations and IMF facility is intended to provide support for pushing the country’s economy toward a sustainable and credible growth

Argentina’s economy has been undergoing economic and social crisis. In October 2019 election Alberto Fernández was elected as a President of Argentine. Alberto Fernández inherited a weak economy by defeating Mauricio Macri. Mr Macri is a businessman turned politician. He served as a President during 2015 to 2019.

By the end of 2019, Argentina’s economy had contracted by 5% from the 2017 level and inflation had whoopingly reached 53.8 %. Level of debt were unsustainable and access to capital was limited. Social conditions had worsened.  Level of poverty exceeded 35%, unemployment reached 10 % and real wages had fallen by over 15 % from 2017 levels.

IMF granted the biggest loan of US$56.3 billion to Argentina, largest ever in its lending history. However economic situation kept on worsening and economy contracted by 9.9% in 2020. However, with the advent of pandemic situation further went worse.

On the positive side as a part of restructuring the economy, Argentina restructured around US$82 billion in foreign exchange debt owed to private bondholders. This helped in securing cash flow relief to the extent of over US$35 billion, spread over between 2020 to 2030. In addition, Central Government supported provincial governments in restructuring US$13 billion forex debt which resulted in US$6.5 billion cash flow relief to Provincial Government between 2020 to 2027. Government also prioritised strengthening of peso based sovereign debt market and supported restructuring of private sector FX borrowings.

The International Monetary Fund (IMF) team, led by Julie Kozack and Luis Cubeddu, released a statement saying that IMF staff and the Argentine authorities had reached an agreement on an Extended Fund Facility (EFF) Arrangement to support economic and financial reforms.

However Argentinian cryptocurrency industry is not happy with the revised restructured deal of providing a facility of US$ 45 billion assistance. This is because the Regulatory Architecture of the deal restricts and discourage the use of Crypto Assets for maintain financial stability as well as to keep a check on Money Laundering

“Strengthening financial resilience: While commercial banks remain liquid and well-capitalized, strong bank oversight will continue, especially following the unwinding of pandemic-related regulatory forbearance. To further safeguard financial stability, we are taking important steps to (i) discourage  the use of crypto-currencies with a view to preventing money laundering, informality and disintermediation; (ii) further support the current process of digitization of payments to improve the efficiency and costs of payments systems and cash management; and (iii) safeguard financial consumer protection”

Bureau Galactik Views

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