Javier Milli’s government and the International Monetary Fund have announced a new agreement for Argentina to continue paying its $44,000 million debt with the multilateral organization. In its first visit to the far-right government of Miley, which ended this Wednesday after nearly a week of meetings, the IMF mission reached a technical agreement with the government to give it a new disbursement of $4.7 billion that must be supported. It will depend on the “continuous and permanent implementation” of the fiscal adjustment announced by its board and by the new Argentine government in mid-December. The money is not a new loan, but corresponds to the disbursements that the Fund has scheduled with Argentina between December of last year and the first quarter of 2024. The country will use this disbursement to repay its debt to the organization.
The IMF celebrated in a statement that “the new government is already implementing an ambitious stabilization plan based on large initial fiscal consolidation, actions to rebuild its reserves, correct relative price imbalances, strengthen the central bank’s balance sheet and make the system. , rules-based and market-oriented.” “This is not a new agreement,” said Luis Caputo, Mili’s economy minister, at a press conference this Wednesday night in Buenos Aires. “The previous agreement, which was down due to non-compliance with goals, has been revived,” explained Caputo, who It did not close the door to requesting more financing from the multilateral body. “If you want to reach a new agreement and eventually request new funds, the Monetary Fund is open to that possibility,” the minister said.
Argentina’s government had been warning for days that Peronism had “virtually collapsed” due to the failure of a payment plan signed in January 2022 with the fund to comply with a $44,000 million debt owed by conservative Mauricio Macri’s government in 2018. Meet fiscal adjustment and reserve accumulation targets. Although formally it was not. Milley, who boasted during the campaign that his cutback plan was “even tougher” than what the IMF was asking for, was very confident he would have no problem with the institution.
The Fund was with them: when the new Argentine government announced its first rate hikes, the removal of energy and transport subsidies and a 50% devaluation, the organization celebrated “strong initial steps” to “significantly improve finances”. which protects the most vulnerable in society and strengthens the exchange rate regime.” This Wednesday, before announcing the new technical agreement, the Fund released a statement warning that “the new administration has inherited an exceptionally challenging economic and social situation. , with growing macroeconomic imbalances that mainly reflect inconsistent and expansionary policies, especially during the last quarter. year”.
It is two years since Alberto Fernandez’s Peronist government and the IMF agreed on a new repayment plan for the original 2018 loan on January 28. The path has been bumpy, with the international body having six iterations of that plan when the Peronist government last met between January 2022 and July 2023. With currency reserves in the historic red, Argentina paying off its maturities with other loans, and with the yuan provided by China for future benefits, the refinancing agreement set off a battle between Fernández and the majority sector of the government led by the vice president. Cristina Kirchner and Peronism bid farewell to the IMF on the eve of the presidential primaries on August 13.
The fund then recognized that Argentina had not met its objectives of reducing public spending and accumulating reserves due to plunging agricultural exports and the government’s “political deviations”, but agreed to provide $7.5 billion that Argentina would use to repay the debt. its debt, and that last meeting with the government ended with a repayment schedule until the end of 2022 and a promise of a new meeting to review the objectives in November last year. Sergio Massa, the Peronist minister of the economy, managed to get the IMF off his back when he faced the presidential campaign as a candidate. But he lost to Miley, and a review agreed to late last year remained up in the air until this week.
The fund’s mission arrived in Argentina last Friday to inaugurate the Miley era, and the meetings with the new Argentine officials were kept completely secret. IMF representatives met with the ministries’ technical teams last Friday and with Economy Minister Luis Caputo and Chief of Staff Nicolas Posse this Monday. According to the government, the agenda was not predefined and the possibility of claiming new funds was ruled out by the head of the Treasury Palace.
The fund expects Argentina to end this year with $10 billion in net reserves and a fiscal surplus. During the announcement of the government, Minister Caputo assigned objectives to the issue at the center of Argentine politics this week: his state reform bill, which began to be discussed in Congress this Tuesday, and the decree of necessity and urgency with 300 amendments. These include privatization of public companies, labor market flexibility and health insurance deregulation. “The President is on the right track and has enormous courage to take action shock Given the urgency and need for change. It is clear that society supports this. The question is whether politicians are going to rise to the occasion,” Caputo said of lawmakers who would have to vote on congressional measures. “Until the law is passed, the measures will be tougher,” he warned.
With Miley, a new phase opens in Argentina’s relationship with the fund, which is more conservative and pro-market. Miley’s alignment with the IMF reinforces far-right alignment with the United States. A position that for Miley also means distancing himself from countries he considers “communist,” such as Brazil or China, two of his main trading partners. The far-right has formally renounced the country’s membership in BRICS, the economic bloc made up of Brazil, Russia, India, China and South Africa, which Argentina joined in August. The decision reduced the financing options available to the Argentine government, which has committed to making its economic adjustment plan effective enough to rely solely on the fund.
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