BUENOS AIRES (Reuters) - The International Monetary Fund’s (IMF) executive board approved a $50 billion financing deal for Argentina on Wednesday and will immediately disburse $15 billion to the Argentine government, the Fund said in a statement.
The government intends to treat the remaining $35 billion as “precautionary,” the IMF said, adding that any further disbursements would be subject to quarterly reviews by the board.
The South American country first announced it was turning to the IMF in May after a run on the peso currency. The move has been politically risky for market-friendly President Mauricio Macri, as many Argentines blame IMF-imposed austerity policies for exacerbating a 2001-2002 economic crisis.
Macri’s government has pledged to accelerate its efforts to reduce a budget deficit as part of the stand-by arrangement.
Incoming central bank governor Luis Caputo said in interviews with local newspapers Clarin and La Nacion published on Wednesday that the arrival of the IMF funds would stabilize the country’s foreign exchange market.
The IMF said Argentine authorities will use half of the initial disbursement, or $7.5 billion, to finance the budget. The Treasury and Finance Ministry has said it will sell those funds on foreign exchange markets in daily pre-announced auctions.
The ministry will announce details of the sales, which Caputo, in his first public comments since replacing Federico Sturzenegger at the head of the monetary authority, said would give more clarity.
“It will offer a panorama of what supply will be,” said Caputo, who had served as finance minister before taking over the role of central bank governor. “We are in a transition toward greater exchange rate stability.”
The peso closed down 0.4 percent on Tuesday at 27.80 per U.S. dollar following sharp gains on Monday, when Caputo hiked banks’ reserve requirements. That level was below the record-low of 28.50 touched last week.
Caputo said that the market had “operated with absolute calm” on Tuesday following the central bank actions.
Argentine markets are closed for a holiday on Wednesday.
Reporting by Jorge Otaola and Luc Cohen; Editing by Daniel Flynn and Rosalba O'Brien