Argentina has made a payment of $2.7 billion on its $44 billion loan to the International Monetary Fund (IMF) using Special Drawing Rights (SDRs) and Chinese yuan, according to the country’s Economy Ministry. The SDRs are an asset within the IMF that countries can use to supplement their official reserves.
The payment was made without tapping into Argentina’s US dollar reserves, ensuring that the country’s central bank reserves are not put at risk. Government spokeswoman Gabriela Cerruti stated, “This way, we comply with what we agreed upon with the Fund and, at the same time, we don’t use [international] reserves, nor do we put the Central Bank’s reserves at risk.”
To make the payment, Argentina utilized $1 billion in yuan from a currency swap line with China and $1.7 billion of SDRs. The IMF has confirmed that Argentina remains current on its financial obligations to the organization.
Argentina’s dollar position has been precarious for some time due to domestic economic problems that have drained the country’s dollar reserves. In fact, reports indicate that the reserves are at their lowest level since 2016.
In response to the challenging dollar situation, Argentina has increasingly turned to the yuan as an alternative means of payment. Earlier this year, the country renewed a currency swap agreement with China for 130 billion yuan (approximately $18 billion), which made the Chinese currency freely available in Argentina. Furthermore, the country’s central bank recently announced its intention to allow commercial banks to open customer accounts in yuan, encouraging local companies to make payments abroad in the Chinese currency. The regulator also pledged to boost yuan sales to finance imports.
In April, Argentina’s Economy Minister Sergio Massa announced that the country aims to pay for the majority of its monthly imports from China in yuan instead of US dollars. China is currently Argentina’s second-largest trade partner, following Brazil, and is the second-largest destination for Argentine exports.
Argentina’s utilization of yuan and SDRs for its IMF loan payments reflects its efforts to diversify its currency holdings and reduce reliance on US dollars. By making use of its currency swap agreement with China and its stock of SDRs, Argentina can secure the funds needed to meet its financial obligations without further depleting its dollar reserves. Additionally, this aligns with the country’s strategy to strengthen economic ties with China and increase trade in yuan.
As Argentina continues to navigate its economic challenges and manage its debt obligations, its utilization of alternative currencies like the yuan demonstrates its commitment to finding creative solutions to support its financial stability and ensure timely payments to international institutions like the IMF.
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