IMF announces it has begun negotiating a new credit program with Argentina
The International Monetary Fund (IMF) is starting talks with Argentina with a view to a new aid plan. IMF spokeswoman Julie Kozack said on Thursday that the organization continues to collaborate constructively with the Argentine authorities. The current program, totaling 44 billion dollars, expires at the end of December and had been signed in March 2022, during the previous government.
According to economist Camilo Tiscornia, although there are still no details on the new agreement, the purpose of the announcement is to bring calm to the markets.
"This is already a positive signal to show to the markets. It's like saying: 'Look, the International Monetary Fund is behind us [supporting us], so you can trust us.' Then we will have to see the fine detail of what is agreed with the IMF," says Tiscornia.
The spokesperson for the organization praised the macroeconomic adjustment plan that President Javier Milei put in place in his first year in office and described its results as impressive. However, the economist explains that, although the program had been renewed under the previous government, the IMF requirements had not been met.
"The current government has made an enormous fiscal adjustment. This is part of what the International Monetary Fund highlights. This adjustment has allowed Argentina to lower inflation and for the economy to grow again, according to the latest data. In the past, the Fund turned a blind eye. This, I believe, was a problem for the Fund. But the current government has done many things, and that is why compliance with the agreement is very good. There is little that has not been fulfilled. It is not that the Fund is giving away praise; the Government has done a lot to ensure that what has been achieved is valued positively," stresses Tiscornia.
For Camilo Tiscornia, Argentina has met some of the requirements, but there is still much to do.
"What remains pending from what the Fund could ask for? The doubt about whether the exchange rate in Argentina is adequate, given that the foreign currency market is not free. There is what is called the cepo, a series of restrictions that the Fund generally does not endorse. That is one of the most problematic points in a possible agreement with the IMF."
Another pending debt is that in Argentina poverty increased 11 percentage points during Milei's administration and more than half of the population lives below that line.
"One of the first things the Fund asks for is some kind of fiscal adjustment, which implies increasing taxes or reducing expenses. Depending on how it is implemented, this can have social impacts. Furthermore, when the IMF asks for exchange rate corrections, for example, through a devaluation, this generates inflation, further complicating the situation of poverty. Generally, these types of measures, although they seek to resolve economic imbalances, have high social costs and contribute to the poor image of the Fund."
According to the economist, the economic situation continues to stabilize, and poverty figures may decrease in next year's reports.
