World Bank approves guarantee package to mobilise up to $2 billion for Argentina's reforms

The World Bank Group on 16 June approved a guarantee package designed to mobilise up to $2 billion in commercial loans for Argentina, in support of the country's economic reform agenda and its return to international capital markets. The World Bank described the arrangement as an innovative package.

The structure combines a first-loss Policy-Based Guarantee from the International Bank for Reconstruction and Development (IBRD) with a second-loss guarantee from the Multilateral Investment Guarantee Agency (MIGA). Together, the guarantees cover 95% of debt service payments on the loans, which carry a six-year maturity with a three-year grace period.

TWO BALANCE SHEETS

The first-loss and second-loss layering means the IBRD guarantee absorbs any shortfall in payments first, with MIGA's cover standing behind it. By drawing on both institutions' balance sheets, the package is intended to mobilise financing on more affordable terms and lower Argentina's borrowing costs. The IBRD lends to governments of middle-income and creditworthy low-income countries, while MIGA provides guarantees against non-commercial risks to facilitate foreign investment in developing countries.

The World Bank said the financing supports Argentina's macroeconomic stabilisation and reform programme, including job creation, infrastructure investment and financial inclusion for small businesses.

MARKET ACCESS

Susana Cordeiro Guerra, the World Bank's vice-president for Latin America and the Caribbean, said the guarantee structure would help bridge Argentina's return to international capital markets by mobilising financing on more affordable terms. Junaid Kamal Ahmad, MIGA's vice-president for operations, said drawing on both the IBRD and MIGA balance sheets would deliver large savings at the point when they are most needed.