Lets talk about #Argentina and the #IMF. Specifically, lets talk about the biggest IMF #Bailout in #History...
Before we start talking about #Argentina & how the #IMF has extended to them a #Bailout that is by far the biggest in the organisation's history, let us first appreciate what the functions of the IMF are...
The #IMF’s main goal is to ensure #stability of the #international #monetary & #financial #system. It helps resolve crises, and works with its 189 member countries to promote #growth & alleviate #poverty...
To this end, the #IMF has three main tools at its disposal: #surveillance, #technicalassistance and #training, and #lending. The "lending" part is what we will be talking about today...
Around June 2018, the IMF Executive Board approved a US$50 Billion #Standby Arrangement with #Argentina. This would be the biggest #bailout in #IMF history. The credit line seeks to rein in soaring #twindeficits in the country and prop up the Argentine peso... 
Quite a couple of things have since happened in the #Argentinian #Economy since the #IMF approval of the US$50 Billion, chief of which was the election in October 2019 and the primary election a month before. All pointed to a loss of confidence in the prior #Marci regime...
Why are we talking about #Argentina and the #IMF now though...well, outside of the obvious (highest bailout in history), the IMF will be visiting Argentina in February 2020 & one wonders if the Argentinians will be able to pay back the IMF...
When one broaches the subject of #Argentina's ability to pay back the #IMF, they are confronted with headlines such as these ones...but what do they all mean? Specifically, what do they mean for other #Creditors...what are the risks vs. rewards of loaning Argentina money...
To answer that question, the best route would be to take a look at the #FinancialMarkets and what #Bonds and #Bond #Spreads look like...that is, the spread between Argentinian Sovereign Paper and, say (relatively risk free) #US #Treasuries...
As at the 10th February 2020, the juxtaposition between #Argentina and #US #Bonds looked as pictured below...
From the tables, it is clear that #investors require more of a #premium for holding Argentinian paper (#yields relatively higher - Positive #Spread)...
From the tables, it is clear that #investors require more of a #premium for holding Argentinian paper (#yields relatively higher - Positive #Spread)...
In closing, we will continue to keep an eye on #Argentina. We will do so because it is an interesting case study. It does not only exemplify what can go wrong in light of #Macroeconomic #Instability, it also shows how important the #IMF is in the global financial system.!
@threadreaderapp Kindly Unroll...
