Argentina and the International Monetary Fund will negotiate the final terms of a flexible credit line for the nation, after President Mauricio Macri provided assurances that debt reduction will be one of his priorities as the government works its way out of an economic crisis.
"Today, I conveyed to the Executive Board the Argentine authorities' intention to request an exceptional access Stand-By Arrangement that would underpin their economic program," IMF Managing Director Christine Lagarde said in a May 18 statement.
Argentina reportedly has requested about $30 billion from the IMF.
Lagarde said the IMF endorsed Argentina's stated goals of creating sustained growth and job creation, reducing debt and protecting economically vulnerable citizens.
The peso fell about 1% against the dollar after the statement, to 24.530 at 1:40 p.m. in New York.
Now that the IMF board has agreed in principle to grant Argentina a credit line, negotiations over the final scope of the agreement are set to begin. Lagarde repeated in her statement that she expects a "rapid conclusion" to the discussions.
The IMF's more flexible approach to Argentina is part of the legacy of its approach to the country's default in 2001, when the Fund required austerity programs and a fixed peso-dollar exchange for the country to get a loan. That stance led to widespread civil unrest and a yearslong downturn.
This time around, Lagarde made a point of assuring markets that "this will be Argentina's economic program, one that has full ownership of President Macri and his government."
Macri, who was elected as a pro-business leader, pushed for fiscal reform. But sharply rising inflation forced the government to raise rates to 40% in the past weeks, and take other emergency measures to stop panicked investors from fleeing the peso.
Earlier this week, Banco Central de la República Argentina sold dollars heavily in the market and said it rolled over 616 billion pesos in short-term Lebac bonds as well as selling another 5 billion pesos in fresh debt.
