BUENOS AIRES: Argentina is set to make a near US$1bil payment to foreign bondholders this week while the government of President Javier Milei continues talks with the International Monetary Fund (IMF) as he seeks to restore investor confidence in the serial-defaulting nation.

       Interest on several hard-currency bonds comes due, marking a major test for Milei just a month after he took office, promising to overhaul South America’s second-largest economy.

       Despite being short on cash, the government is expected to make the payments in part by dipping into foreign reserves that got a boost from Milei’s initial shock measures.

       “It would be a big surprise if they were to default,” Cathy Hepworth, head of emerging market debt at PGIM Fixed Income, said about the payment.

       “It’s a little less certain as the year progresses and as we get to next year.”

       The tab comes due just as the government meets with IMF officials in an attempt to get its US$44bil aid programme back on track.

       The country isn’t seeking a new programme or requesting fresh funding, Milei spokesman Manuel Adorni told reporters in Buenos Aires on Monday.

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       Economy Minister Luis Caputo and Milei’s chief of staff, Nicolas Posse, were due to meet an IMF delegation led by Luis Cubeddu and Ashvin Ahuja after Fund officials met last Friday with technical teams from the country’s central bank.

       Officials are hoping to reach an agreement that would unlock a US$3.3bil disbursement the government needs to repay the IMF by the end of the month. The payment was originally scheduled for November, but the change of government delayed talks.

       As Milei’s team prepared to meet with IMF staff, the peso weakened in parallel markets used to skirt currency controls.

       It touched a fresh low of 1,200 per US dollar on Monday.

       The move marked the seventh day in a row that the parallel rate weakened against the greenback.

       The optimism that Argentina will stay current on its obligations has helped drive an outsized performance for its dollar bonds.

       Over the past three months, the debt has returned 43%, better than the 9% average for a Bloomberg index of emerging market sovereign debt.

       But the payment alone won’t alleviate Wall Street’s concerns about Argentina, whose overseas bonds still trade in distressed territory. — Bloomberg