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Argentina and IDB agree to $5 billion deal as foreign reserves dwindle

·1 min read

BUENOS AIRES, Sept 6 (Reuters) - Argentina and the Inter-American Development Bank (IDB) agreed on Tuesday to expand financing to the South American country to almost $5 billion between 2022 and 2023.

The agreement comes as Argentina seeks to leave behind financial turmoil that has raised inflation to over 90% this year, pushing consumption and economic activity down and over 40% of the population into poverty.

After a meeting between Argentine and bank officials, IDB President Mauricio Claver-Carone told reporters that the bank and the country have drawn up a plan to unlock "what was stuck," alluding to recent doubts about financing Argentina.

Sources with knowledge on the matter told Reuters that more than $3 billion of the agreed total would be sent to Argentina this year.

The idea came after negotiations were held in Washington between representatives from Argentina's economy ministry and the IDB, a government source said, adding that the country urgently needs foreign currency to avoid a depreciation of the peso in the midst of high inflation.

Of those $3 billion, $1.2 billion would be freely available and would be disbursed in two steps: $500 million before Sept. 30 and $700 million before Dec. 30, according to the Argentine government source.

In 2023, the agency will disburse another $1.8 billion.

"This measure ... allows us to show the strength that we want our central bank to have in reserves," Argentine Economy Minister Sergio Massa said after the meeting with IDB officials. (Reporting by Nicolas Misculin; Additional reporting by Kanishka Singh; Editing by Stephen Coates)