The Government asks China to expand the currency swap

Argentina is asking China for an extension of its bilateral currency swap in yuan meanwhile it seeks to strengthen its monetary reserves before large maturities with the International Monetary Fund, according to people with knowledge of the matter.

The second largest economy in South America seeks to ask China to expand its 130 billion yuan ($20.6 billion) swap by an additional 20 billion yuan, according to one of the people, who asked not to be identified because the conversations are private. Argentina has already made the request and the issue will be discussed next week in Beijing when President Alberto Fernández travels there for the Olympic Games celebrations, another person said.

Expand the swap, which was originally agreed in 2009, would allow Argentina to strengthen its reserves in the midst of negotiations with the IMF to refinance more than $40 billion of a record loan.

Exclusive: Alberto Fernández plans a strategic trip to China

The country must pay more than US$4 billion in the first quarter, including principal and interest payments, and net reserves have fallen to US$1.8 billion, according to estimates by the consulting firm Anker Latin America.

secrecy in government

Argentina’s presidential office declined to comment. A central bank spokesman said the institution is constantly talking to peers and declined to comment on the specific request. The Economy Ministry’s press office did not immediately respond to a request for comment.

El swap, which was renovated in 2019, represents more than half of the total stock of gross reserves in Argentina. The swap is an agreement between the two central banks, whereby the People’s Bank of China has an account in renminbi with the Argentine central bank, and the latter has an account in pesos based in China. Banks have the option of drawing this money for eventual needs and, if they use it, they must return it with interest to the counterparty.

The country will have to make an interest payment of more than US$700 million to the IMF, according to estimates from the Congressional Budget Office. Fernández has said that the government cannot meet its payments with reserves at these low levels.

©2022 Bloomberg L.P.

You may also like