As in recent periods of economic stress, such as H1 2022, net reserves enter negative territory

Given high FX pressures and lower export income, we anticipate net reserves to remain negative throughout 2023

The Central Bank of Argentina typically increases its interventions in the parallel market during the second semester of the year, aiming to defend the currency’s value. However, the foreign currency reserves have reached historic lows, and the disparity between the official and the parallel exchange rates remains high. Given the FX gap and monthly inflation ranging from 7% to 9%, clients should anticipate a faster depreciation rate in the coming months. A higher official rate and persistent inflation will weigh on consumer spending. Nonetheless, a devaluation enhances the country’s competitiveness, leading to an improved outlook for export firms and the potential to bolster international reserves. Import-dependent firms should continue to expect challenging operational conditions as import restrictions and capital controls will likely remain in place until Q1 2024. Conversely, the outlook for the B2G environment is unfavorable as a fiscal consolidation plan involves lower government spending. 


  • On June 30, Argentina utilized its stock of Special Drawing Rights (SDR), the international reserve asset of the IMF, along with Chinese yuan from the freely available portion of the China Swap, to service its obligations with the IMF. The payment for July amounts to USD 2.6 billion, and, given diminishing reserves, Argentina must obtain approval from the IMF for the disbursement of SDR before the end of the month to meet its debt obligations.
  • The Net International Reserves (NIR) is an indicator of a country’s external vulnerability. According to the IMF, NIR is calculated as reserve assets minus predetermined net short-term foreign currency liabilities.
  • In the case of Argentina, gross reserves were USD 27.4 billion on July 6, the lowest level since 2016. Short-term liabilities include reserve requirements for private and public deposits (around USD 10.5 billion), a loan with the Bank for International Settlements (USD 3.1 billion), and China’s Swap (approximately USD 17.9 billion). 
  • Thus, based on the IMF’s standardized statistical definition, we estimate that Argentina’s NIR is approximately USD -4.1 billion. The country’s negative net reserves indicate significant macroeconomic imbalances, and limited external liquidity could trigger a severe debt and banking crisis.

Our View

Amid high vulnerabilities, we expect the IMF to review the program’s targets and approve liquidity disbursements, thereby reducing Argentina’s short-term default risks. However, we anticipate that misalignments will persist, with reserves remaining in the negative territory throughout 2023 and a negative growth outlook (-2.0% for 2023 and -1.2% for 2024). Moreover, despite the recent deceleration trend, inflation is still significantly high, and we expect triple-digit inflation to persist in 2024 (annual average of 101%). Despite the high level of uncertainty surrounding the presidential candidate’s economic program, considering the prevailing macroeconomic imbalances, our projections for 2024 incorporate an inevitable stabilization plan. This plan entails a substantial reduction of the fiscal deficit, accompanied by a devaluation expected to occur in late 2023 or early 2024.

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