On Wednesday, Javier Miley received his first payment from the International Monetary Fund, some $4.7 billion that the organization pledged to the new government on January 10, about half of which Argentina will use to meet debt maturities against the same backdrop. This afternoon, the Executive Board of the International Monetary Fund approved the quarterly targets for the debt repayment plan adopted by Argentina in 2018, during the era of the conservative government of Mauricio Macri, and renegotiated in 2022 with Peronist Alberto Fernandez. This is the seventh review of this payment plan and the first under Miley's government, which requested the agreement continue earlier this month.
The IMF disbursement is “not new money,” as Economy Minister Luis Caputo explained on January 10, but is part of the repayment plan that Peronism negotiated in 2022 to push it to adjust the terms of repayment of the $44,000 million debt that Macri had He took over four years ago.
However, it is a push from the organization to Miley's government. The payment plan was last reviewed together in August last year, weeks before the presidential primaries, while Miley gained strength in the opinion polls and Peronism, led by then economy minister and presidential candidate Sergio Massa, sought to block the road. Spending money to remove the International Monetary Fund from the election campaign. He got there halfway: the IMF board then authorized another $7.5 billion disbursement, but he did so as an exception. The International Monetary Fund said in a statement that Argentina did not achieve its goals for accumulating reserves and reducing the fiscal deficit due to “an unprecedented drought and policy deviations,” but it agreed to the new economic aid package “to protect stability and promote sustainability in the medium term.” “.
Miley won the second round on November 19, and the seventh review of the agreement, scheduled for the end of last year, has been suspended until this month. On the 10th of this month, Minister Caputo announced that the review had borne fruit. The IMF welcomed the new government's “strong initial measures” to “significantly improve public finances in a way that protects the most vulnerable groups in society and strengthens the exchange rate regime.” The government stated, in Caputo's voice, that the agreement brought positions closer to “if one wanted to go to a new agreement and eventually ask for new money,” and the Fund warned that this would depend on “continuous and permanent implementation.” Among the fiscal reforms initiated by the new Argentine government in December are a 50% devaluation of the peso and an increase in energy and public transportation prices, among others.
“After the completion of the latest reviews, the already significant imbalances and distortions in Argentina have worsened and the program has deviated significantly, reflecting the inconsistent policies of the previous government,” Fund Director Kristalina Georgieva said in the organization’s official statement. Amid this difficult legacy – high and rising inflation, depleted reserves, and rising levels of poverty – the new administration is taking bold steps to restore macroeconomic stability and begin to address long-standing impediments to growth. These initial measures have averted a balance of payments crisis, although the path to stabilization will be complex.
Since Wednesday, the Argentine Congress has been discussing the giant law through which the new government intends to liberalize the economy by selling public companies, changing the formula that adjusts pensions to inflation, and increasing taxes on federal imports. The last two measures were deleted from the plan while the government seeks consensus among representatives, but Miley still hopes that Congress will grant him emergency legislative powers to impose his plan. The debate, in which MPs faced off point by point over a law containing about 400 reforms, continued throughout Wednesday and may continue until the end of the week.
Miley has promised the IMF that it will turn the 2023 fiscal deficit, roughly 3% of GDP, into a 2% surplus for this year, and that it will work to accumulate reserves amounting to nearly $10 billion. How will he do that while his mandate stumbles to repeal the law in Congress? The question is still open. In its forecast report for this year, presented on Tuesday, the International Monetary Fund expects Argentina to suffer a 2.8% decline in gross domestic product and for annual inflation to reach about 150%. Yet she is optimistic: last year Argentina's inflation rate was 211%, the highest in the world, and a 25% increase in prices accumulated in December alone.
According to local media reports citing official sources, Argentina will use about 2,800 million of the 4,700 million it received to pay off debt maturities with the fund itself, between the installment that was due on Wednesday and the interest scheduled for February 1. The rest of the money will be used to pay off more debt in April.
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