Argentina tapped its Chinese currency swap line to help cover part of an October payment that was due to the International Monetary Fund, a source told Reuters on Tuesday.
Overall, Buenos Aires owed the lender 1.98 billion, or $2.6 billion, in so-called special drawing rights (SDR), which is an international reserve asset created by the IMF.
Argentina had 1.4 billion in SDR available last month, and used Chinese yuan to help close the gap, according to Reuters.
The payment covered maturities stemming from a $44 billion debt deal that Argentina holds with the IMF, one replacing a failed bailout program from 2018.
Use of the yuan comes as the South American country continues to face depleted dollar reserves, which has forced the government to leaned on its $18 billion yuan swap line on other occasions this year. Between June and July, $2.8 billion worth of yuan was used to help meet IMF obligations.
And as Argentina taps Chinese yuan to repay the IMF, it’s also using IMF money to repay China.
In August, Argentina repaid $1.7 billion to the People’s Bank of China using a disbursement secured from the IMF. Other lenders were also paid back, including Qatar and the Development Bank of Latin America.
Meanwhile, daily yuan transactions in Argentina’s foreign exchange markets hit a record of 28% in June, while over 500 companies looked to purchase imports using the yuan.
Still, the greenback remains popular among Argentine consumers, who are increasingly using it for daily transaction as hyperinflation erodes faith in the country’s own peso.
And the idea to dollarize Argentina’s economy has taken center stage in its presidential elections, pushed by candidate Javier Milei. Though elections were held in October, the libertarian is facing a runoff with Economy Minister Sergio Massa on November 19.
Source: Markets Insider
