IMF extends support to Mili and disburses 4.7 billion to Argentina

This Wednesday, Javier Miley received its first disbursement from the International Monetary Fund, approximately 4.7 billion dollars that the organization promised to give to the new government on January 10 and from which Argentina will have to meet debt maturities with the same background. Will use about half. This afternoon, the IMF Executive Board approved the quarterly targets of the debt payment plan, which Argentina took up in 2018 during the government of conservative Mauricio Macri, and was renegotiated with Peronist Alberto Fernandez in 2022. This is the seventh review of this payment plan and the first under the Meili government, which requested to continue the agreement earlier this month.

As Economy Minister Luis Caputo explained on January 10, the IMF disbursements are “not new money”, but part of a payment plan that Peronism has agreed to pay in 2022 by modifying the payment terms of the $44,000 million loan. Had a conversation. That was taken by Macri four years ago.

However, this is an encouragement from the organization to the Miley government. The last two amendments to the payment plan came together in August last year, just weeks before the presidential primaries, while Militari had gained strength in the polls, and Peronism, led by then-economy minister and presidential candidate Sergio Massa, had There was a demand to close it. Disbursement to remove IMF from election campaign. They got it halfway: the IMF Board of Directors then authorized another disbursement of $7.5 billion, but did so as an exception. Argentina has not met its reserve accumulation and fiscal deficit reduction targets due to “unprecedented drought and policy deviations”, the IMF said in a statement, but needed to “protect stability and strengthen stability in the medium term”. A new economic assistance package has been approved. ,

Miley won the second round on November 19 and the seventh review of the agreement, scheduled for the end of last year, was left up in the air until this month. On the 10th, Minister Caputo announced that the review had been successful. The IMF welcomed the new government’s “strong initial actions” to “significantly reform public finances, protect the most vulnerable in society, and strengthen the exchange rate regime.” The government, voiced by Caputo, said that the agreement brings the situation closer to “if one wants to move to a new agreement and ultimately request a new fund”, and the Fund warned that it would require “continuous and permanent implementation”. Will depend on. The fiscal adjustment that the new Argentine government initiated in December began with a 50% devaluation of the peso and increases in energy and public transportation rates.

“Following the completion of the latest reviews, Argentina’s already large imbalances and distortions worsened and led to significant deviations from the program, reflecting the inconsistent policies of the previous government,” said Fund Director Kristalina Georgieva in an official statement from the organization. ” ”Amid this difficult legacy – high and rising inflation, declining reserves, and high levels of poverty – the new administration is taking bold steps to restore macroeconomic stability and overcome long-standing obstacles to growth. These initial measures avoided a balance of payments crisis, although the path to stabilization would be complex.

Starting this Wednesday, the Argentine Congress is debating the megalaw with which the new government intends to deregulate the economy with the sale of public companies, a change in the formula that adjusts pensions to inflation and an increase in taxes on federal imports. The last two measures have been removed from the plan while the government seeks consensus among representatives, but Miley still hopes Congress will grant him emergency legislative powers to implement his plan. Debate over the legislation containing nearly 400 reforms, which delegates faced point by point, continued throughout Wednesday and will likely last into the weekend.

Miley has promised the IMF that he will turn the fiscal deficit for 2023, about 3% of GDP, into a 2% surplus for this year, and that he will accumulate reserves of about $10 billion. How he will do that, while the process of repealing the law is underway in Congress in his state, is still an open question. In its forecast report for this year presented on Tuesday, the IMF predicts Argentina will suffer a 2.8% decline in gross domestic product and annual inflation will reach nearly 150%. Still, it’s optimistic: Argentina’s inflation last year was 211%, the highest in the world, with prices rising 25% in December alone.

According to local media reports citing official sources, Argentina will have to pay approximately 2,800 million of the 4,700 million it received to pay the maturity of the loan with the fund, between the installment ending this Wednesday and the interest scheduled for February 1. Will use. The remaining disbursement will be used to repay excess debt in the month of April.

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