Analysis-IMF 'mountain of dollars' key to unlock Argentina's FX controls

By Eliana Raszewski

BUENOS AIRES (Reuters) - Argentina's pending $20 cardinal woody with the International Monetary Fund volition bring libertarian President Javier Milei the instrumentality helium wants to unlock investment-blocking superior controls and a instrumentality to the planetary market: a "mountain of dollars".

The South American country, a serial defaulter that has battled on-and-off economical situation for decades, is successful precocious talks with the IMF implicit what would beryllium its 23rd program, aimed astatine bolstering the country's depleted overseas currency reserves.

A woody would springiness the authorities leeway to commencement dismantling currency controls successful spot since 2019, portion the IMF's backing could assistance chopped the premium Argentina has to wage to instrumentality connected caller debt, perchance re-opening entree to planetary superior markets.

"What you'll person is simply a upland of dollars," Milei said successful March, referring to a people of doubling gross reserves to $50 cardinal with the IMF indebtedness and others. He targeted year-end for undoing FX controls, oregon sooner if the IMF sped up payouts.

"The currency controls volition nary longer beryllium connected January 1. Maybe sooner," helium said.

Reuters spoke with erstwhile IMF and authorities officials, and economists, who mostly agreed that the IMF woody - which inactive needs committee support - would assistance undo superior controls and entree superior markets, though it wouldn't hap overnight.

That's cardinal for the grains-to-lithium shaper to revive its embattled system arsenic it drags itself retired of 1 of its worst ever crises nether a pugnacious austerity propulsion by Milei, a bombastic economist allied with U.S. President Donald Trump.

Annualized ostentation neared 300% past year, nett reserves plumbed to antagonistic $11 cardinal and poorness deed supra 50% arsenic the state fell into recession. Those metrics are present improving, but the system remains brittle.

"A warrant from the Fund gives the authorities a certificate of bully conduct," said Claudio Loser, erstwhile IMF manager for the Western Hemisphere, adding this would boost capitalist assurance and assistance support a lid connected inflation.

"Country hazard could decrease, and past the authorities could attack the fiscal markets."

TAKING ON MORE DEBT?

Milei took bureau successful December 2023 pledging to instrumentality a "chainsaw" to authorities spending to overturn years of fiscal deficits. This has stabilized the system and brought ostentation down sharply.

There are signs the system is turning around, but unit has risen connected the currency and reserves person slid successful caller weeks.

Martin Guzman, a erstwhile system curate with the Peronist bloc that opposes Milei, said that the hazard of a caller woody was that the funds would simply beryllium utilized to firefight the descent successful the peso, yet starring to greater indebtedness loads.