IMF urges Argentina against ad-hoc FX policy with 100% inflation
With inflation forecasts reaching 100% for the year, IMF Western Hemisphere Director Ilan Goldfajn cautions Argentine officials against “different FX measures or prices."
The International Monetary Fund is urging Argentina against unconventional currency measures such as creating multiple exchange rates at a time when inflation is expected to reach 100 percent by the end of this year.
IMF Western Hemisphere Director Ilan Goldfajn cautioned Argentine officials against “different FX measures or prices or things like that.”
“We continue to believe that this is the way forward not to have ad-hoc and separate measures,” Goldfajn told Bloomberg News in an interview on the sidelines of the IMF’s annual meetings in Washington. “If you have them, you should do it in a temporary basis and unwind them going forward.”
His comments come days after Argentina moved forward with new taxes applied to the official exchange rate for tourism abroad and some music concerts, piling onto a long list of informal exchange rates.
While Argentine officials don’t believe the new measures violate the programme, Goldfajn is the second IMF official after Managing Director Kristalina Georgieva last week to push against the government’s currency strategy.
The IMF board approved a waiver for Argentina’s programme last week for its “multiple currency practices,” after the government invented a new exchange rate just for soybean exporters in September. The waiver was approved because the exchange rate was temporary.
Goldfajn also conceded that Argentina’s inflation outlook has worsened since the US$44-billion programme began in March. Economists surveyed by the Central Bank in September see inflation reaching 100 percent by the end of this year.
The fact that inflation expectations have “reached 100 percent is an issue that was not envisioned at the beginning,” Goldfajn said. On the programme, “we believe that if it’s well implemented, we would like inflation to start to go down.”
Other comments from Goldfajn:
– IMF staff reviews on Argentina
“There’s also some forward looking in this review. We will look, if the budget is approved, it will need to be approved. So if it’s approved, it’s another sign that this is happening, and we will insist and we’ll continue to insist on the implementation of the programme”
– Argentina’s 2022 fiscal target of 2.5 percent of gross domestic product
“Whatever was delayed in the first half of the year needs to be compensated, and it’s already been started to be compensated.”
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