Argentina and IMF to rework US$44-billion deal as drought hits economy

Argentina and the International Monetary Fund are going back to the drawing board again on the country’s US$44-billion programme as a record drought is expected to push the country into recession, according to an Economy Ministry official who asked not to be named to discuss upcoming changes.

The official added that all options are on the table in the fifth review of the IMF’s biggest programme, including discussions on disbursements, but didn’t provide more specifics. An IMF spokeswoman didn’t immediately respond to a request for comment during weekend hours. The Economy Ministry declined to comment

Economy Minister Sergio Massa met with IMF First Deputy Managing Director Gita Gopinath Friday on the sidelines of the lender’s spring meetings where they discussed the economic impact of Argentina’s worst drought on record. La Nación newspaper reported the development earlier Saturday. 

It’s another setback for Argentina’s programme, coming less than two weeks after the IMF changed a key target for the third time since the deal began about a year ago. During that review, IMF staff and Argentine officials cut the level of net reserve accumulation, or cash stockpile, needed to be built up at the Central Bank this year to US$2.6 billion from US$4.8 billion previously. 

As of April 3 when the IMF published its full report, officials kept the key primary fiscal deficit target for this year at 1.9 percent of gross domestic product. Achieving that target “remains essential” to the programme, Gopinath said in a statement on April 1.

Earlier this week, the IMF slashed its growth forecast for Argentina to 0.2 percent of GDP from two percent previously, while private economists in Buenos Aires are projecting a four percent contraction. Government data published Friday showed prices rose 104 percent in March from a year ago. Economists at JPMorgan Chase & Co now forecast 130 percent inflation by the end of this year.