IMF approves new $7.5 billion loan for Argentina amid financial crisis

The International Monetary Fund's (IMF) executive board has approved a $7.5 billion disbursement for Argentina despite Buenos Aires missing key financial targets as it grapples with a prolonged economic crisis, the IMF said.

The agreement on Wednesday combines the fifth and sixth reviews of an existing 30-month, $44 billion IMF programme, in a move aimed at improving the South American country's dire economic situation.

"Since completion of the fourth review, key program targets were missed reflecting the historic drought along with policy slippages," the IMF announced in a statement.

"Against the backdrop of high inflation and rising balance of payments pressures, an agreement was reached on a new policy package centred on rebuilding reserves and enhancing fiscal order," the IMF continued.

Argentina is dealing with a severe economic crisis that has seen the inflation rate soar above 100 percent, and poverty levels climb up to 40 percent.

Wednesday's announcement brings the total disbursements by the IMF to Argentina under the arrangement to around $36 billion, with the next review scheduled for November, the IMF said.

News of the agreement was first announced by a spokesperson for Argentina's economy minister, Sergio Massa, who is also running for president in elections scheduled for later this year.

Massa travelled to Washington this week to meet with senior IMF and World Bank officials, as the two international financial institutions considered separate decisions relating to the country.

On Tuesday, the World Bank approved two new projects for Argentina worth around $650 million which are targeted at increasing access to financing for climate change mitigation and adaptation and strengthening existing food programs.

The projects are aimed at helping Argentina "lay the foundations for more sustainable and resilient growth and improve the efficiency of public services and social protection," Marianne Fay, the World Bank's country director for Argentina, Paraguay and Uruguay, said in a statement announcing the decision.

Meanwhile, two sources told Reuters news agency that Argentina plans to tap the latest loan disbursement to repay China part of the money it borrowed through a currency swap line.

Recently, Latin America's third-largest economy also used $2.8 billion equivalent of yuan to cover just over half of two repayments from a 2018 IMF loan, in order to avoid a default to the multilateral lender.

With net negative foreign exchange reserves of over $8 billion, Argentina is expected to send back as soon as this week the $1.7 billion it used from the swap in July to the People's Bank of China (PBOC), one person said, asking not to be named because the details of the agreement are private. Buenos Aires is not bound to immediately repay the yuan it has previously used in June, the source added.

The plans shed some light on the crucial bridge loan that China extended to Buenos Aires via a currency line established with Argentina more than a decade ago, whose details have remained largely secret.