Argentina to move real rates to positive territory, IMF says

The International Monetary Fund said Monday that Argentina will move real interest rates into positive territory and ease currency controls as the crisis-prone nation seeks to continue a slowdown in price increases and protect its foreign exchange reserves.

The country also aims to eliminate by the end of this month a mechanism that allows exporters to sell 20 percent of their dollars in the parallel market at higher exchange rates, the IMF said in a staff report following the latest review of the country’s US$44-billion loan.

The fund also said it forecasts Argentina’s economy to contract 3.5 percent this year — deeper than its previous forecast for a 2.8 percent drop — with inflation to end the year at nearly 140 percent and the country to post a primary fiscal surplus of 1.7 percent.

President Javier Milei‘s spending cuts have eased monthly inflation for five straight months, albeit as another recession punishes the country.

Milei is eying a new IMF loan that he says will help lift currency controls and scrap capital restrictions. Those policy steps are needed for the country to eventually return to international debt markets for the first time since a sovereign debt restructuring in 2020. Milei met with IMF Managing Director Kristalina Georgieva on the sidelines of the Group of Seven summit in Italy last week.