Argentina renews US$5 billion currency swap with China
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The Central Bank of the Argentine Republic (BCRA) announced the renewal of the currency swap with the Central Bank of the People’s Republic of China (PBOC). This agreement, which covers an amount of US$5 billion, extends the deadline through July 2026, beyond the original end date set at the end June this year.
The announcement comes at a critical time, as the lack of an agreement between the countries would have forced the BCRA to pay the PBOC US$2.9 billion before the end of the month and another US$1.9 billion in July of this year, putting the Central Bank’s reserves at risk. This financial relief was confirmed in a joint statement issued by both monetary institutions.
The official statement specified that “the BCRA will gradually reduce the activated amount of the swap over the next 12 months. Thus, coinciding with the expiration date of the current currency swap agreement, the mentioned tranche will be completely deactivated by mid-2026.”
Currency swaps are a tool commonly used by central banks to increase their reserves at no additional cost, as technically it is not a loan but an exchange. A fee is only applied when the money is effectively used.
The swap agreement between Argentina and China began in 2009 and the total amount exchanged since is of US$20 billion. The activated tranche of US$5 billion was used last year under the administration of former Minister of Economy, Sergio Massa, to stabilize the exchange market during the turbulent electoral period.
“The activation of the swap in 2023 allowed the BCRA to manage the balance of payments flows during critical moments for the domestic economy,” the statement said. “The confirmation of the extension with the PBOC reinforces the commitment assumed by the current BCRA administration to overcome the external payment crisis, fully respecting the contractual commitments previously agreed with all its counterparts.”
The proximity of the swap’s expiration without a confirmation of renewal had generated turbulence in the financial market. The tense relationship between Argentina president Javier Milei and the Chinese government had raised doubts about the renewal of the agreement, which increased market volatility. Argentine bonds experienced a drop of more than 10% between the end of May and the beginning of June due to the uncertainty.
The news of the agreement prompted a rebound in bonds and alleviated pressures on alternative dollars. With this renewal, the BCRA hopes to continue reducing risks during the current economic transition initiated in December 2023, strengthening the financial and economic ties between Argentina and China.
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