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IMF’s Lipton Says Relationship With Argentina ‘May Have to Wait’

Patrick Gillespie

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Argentina’s financial program with the International Monetary Fund will be on hold for some time as the nation grapples with severe political and economic uncertainty, the Fund’s Acting Managing Director David Lipton said an interview.

“Our job in this setting is to help them get through this period, give them advice, work toward an eventual resumption of a relationship -- some kind of financial relationship with them -- which may have to wait awhile,” Lipton told Bloomberg Radio on Wednesday.

He added that “Argentina’s situation right now is extremely complex” but that recent government measures “have calmed markets down.”

His remarks are the clearest indication yet that the IMF’s record $56 billion agreement with Argentina is on ice for now, including a $5.4 billion loan disbursement that’s been up for approval since Sept. 15. The IMF had previously been reported to have been waiting for more clarity on the next government’s policies.

Listen to Lipton’s interview here, starting at 39:07.

President Mauricio Macri’s defeat in an August primary vote unleashed a currency crisis that led him to implement capital controls, delay local debt payments, and say that he would seek a “voluntary reprofiling“ with other creditors, including the IMF. On the other hand, front-runner presidential candidate Alberto Fernandez hasn’t yet presented an economic program nor who will lead his economic team, although he had called for a revision of the IMF deal. Investors now see a 95% chance of default in Argentina within the next five years.

Read More: IMF Likely to Withhold Argentina’s Billions Until Policy Fog Lifts

Right now, Argentina doesn’t seem to meet the IMF’s forward-looking requirements, such as a sustainable debt path or access to markets, for additional loan disbursements. Some analysts estimate the country has about $6 billion in funding needs for the rest of the year, so IMF money would help cover upcoming debt payments.

Whoever Wins

Lipton, who met with Macri, Economy Minister Hernan Lacunza and Central Bank President Guido Sandleris Tuesday in New York, said the IMF will work with whoever wins the Oct. 27 presidential election.

“We’re standing ready to help whichever side wins the presidential election,” he said. “It’s not our business to try to divine the political path forward, we can’t do that.”

Lipton downplayed, however, Argentina’s use of capital controls that are leading to the revival of its parallel exchange rates, including a black market. Such controls, he said, are “something we can monitor.”

“We’ve dealt with countries that have parallel markets in many, many circumstances. That’s not a big challenge,” he added. “The bigger issue there is how to calm the market and stabilize the situation.”

Lacunza met on Wednesday again with IMF officials in Washington, including the Fund’s incoming head Kristalina Georgieva, and an Argentine technical mission plans to return to the U.S. in a couple of weeks for the organization’s annual meetings in October.

In a statement, the economy ministry quoted Georgieva as saying she considers Argentina a “top priority” for the Fund. It added that she pledged to keep working with Argentina, “understanding the economic and political difficulties the country is going through.”

(Updates with statement from finance minister office on meeting with incoming IMF head)

--With assistance from Jorgelina do Rosario, Paul Sweeney and Tom Keene.

To contact the reporter on this story: Patrick Gillespie in Buenos Aires at pgillespie29@bloomberg.net

To contact the editors responsible for this story: Juan Pablo Spinetto at jspinetto@bloomberg.net, Walter Brandimarte

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